Issues with Bitcoin and

Impact on Environment
 The Biggest Challenges Facing Bitcoin
1. Volatility
2. Ease of use
3. Widespread acceptance
4. Potential for theft
5. Reputation for criminal activity
6. Tax issues
7. Scalability
 Volatility

• Bitcoin has been incredibly volatile since its inception.

• $10 worth of bitcoin in 2010 would be worth millions of dollars today.
And the volatility isn't slowing down
• This environment has made bitcoin extremely popular among
speculators who buy bitcoin hoping the price will continue to rise, but
it isn't helping to fuel bitcoin's popularity as a currency.
 Ease of use

• To be fair, it has gotten much easier to buy, sell, and use bitcoin over
the past several years, but it still isn't user-friendly enough to
encourage mainstream adoption.
• Currently, if the average person wants to buy bitcoin, he or she needs
to open an account at a bitcoin exchange such as Coinbase, link a
checking account and in many cases wait several days for the
transaction to clear.
• The entry of Square and similar companies into the bitcoin game has
the potential to fix this issue.
 Widespread acceptance

• There are many retailers, particularly online, through which

consumers can pay for transactions in bitcoin, but the digital currency
still isn't anywhere close to being widely accepted.

• If Square, or another big payment processing company, decides to

allow retailers that use their hardware to start accepting bitcoin
payments easily, it could be a game-changer for the mainstream
adoption of bitcoin.
 Potential for theft

• Security measures exist that make bitcoin virtually impossible to steal,

but taking advantage of them involves a somewhat complex
knowledge of how bitcoin works and can often require significantly
more effort on the part of the user.

• With online bitcoin wallets, there's always some chance that the
currency could be stolen. It's happened before and could certainly
happen again.
 Reputation for criminal activity

• Bitcoin, especially in its early days, was well known for its use on the
Dark Web, in money-laundering activities, or to purchase illegal items.

• As the only true anonymous source of payment, bitcoin became the

natural choice for people who wanted to buy drugs, illegal weapons,
etc.

• Anonymity is one of the positive aspects of bitcoin, but it does create

the potential for illicit use.
 Tax issues

• Under current law, the IRS considers bitcoin and other digital
currencies to be "intangible property," which means they're subject to
capital gains taxes.
• If you buy bitcoin and then sell it for more than you paid, you'll need
to report the difference on your taxes.
• Even worse from a currency perspective, every time you use bitcoin to
buy something, it is a potentially taxable event.
• For example, if I pay for a $5 cup of coffee with bitcoin that originally
cost me $4, that dollar in profit is technically a capital gain.
 Scalability

• Without getting too deep into the technical details, bitcoin has a
serious scalability problem.

• The underlying technology behind bitcoin, the blockchain, limits the

amount of information that can be contained in each block to 1
megabyte of data.

• This limitation allows for a maximum network capacity of about three

transactions per second.
 Scalability

• In other words, as more and more bitcoin trades and purchase

transactions are executed, the network will have a more difficult time
keeping up, which could result in serious processing delays.
• For comparison, Visa's network processes roughly 2,000 transactions
per second.
• So if bitcoin ever wants to achieve a larger scale, something will need
to be done. There are several proposals on the table, but the eventual
long-term solution remains unclear.
Some of the issues which have to be tackled to help bitcoin's growth

• Bitcoin transaction time or the time required to get confirmations is still on the high
side as compared to credit or debit card transactions.

• The security of Bitcoins has become a major issue. As the usage of Bitcoin is
increasing, hacking of bitcoin wallets and even exchanges has been more widespread.

• As of now Bitcoins are too technical for common people and are not so user friendly.

• It is difficult for people to understand why bitcoin prices are so volatile, why
transaction time is so high and how they should safeguard their bitcoins.
 Can these problems be solved?

• The bottom line is that bitcoin and the general concept of a digital
currency is still very much in its infancy, and several problems need to
be solved before bitcoin achieves mainstream adoption as a form of
currency.

• However, most of the problems facing bitcoin can be solved or

worked out, and the recent news involving Square Cash is certainly a
step in the right direction.