The Crypto paradox and why are they failing
Conventional Exchanges responsible for Crypto Paradox
The conventional medium of exchanges like social media platforms are benefiting largely from economies of scale, like the more the users the more the money, as the cyber population is primarily attracted to “number of users”. The average costs are largely lowered as they are spread over the transactions, but in the case of cryptocurrencies, this does not apply. Cryptocurrencies declared capacities are largely fixed and costs are variable, which means that they are vulnerable to congestion; more patrons apparently reduces the “attraction”.
More competing transactions create significant delays, which directly implies to the fact that transaction costs have to rise in order to eliminate the excess demand. As transaction demand expands, high transaction costs get worse and worse, which is why Bitcoin is continuously drowning.
The Innovation of anonymity triggered intrinsic problems
It is correct, that Bitcoin, Ethereum and Ripple were created from emergent disruptive technologies, fixating the flaws of the present fiat currency establishments, and further creating their own buoyant fate. On the other hand, the power of anonymity did fulfil a percentage of promise but became a burden later as questions of tax evaders, money launderers, and attendants of illicit goods started to surface. Since the detection of nefarious behaviour became harder and harder, risks of market manipulations, scams and outright frauds, raised a lot of controversies. The concept of “up front” money becomes a risk that restricted a big pool of willing transactions.
The Question of Scalability
The decentralization mechanism on which the promise of Blockchain is based, offer some critical benefits, like a guarantee of security, fault tolerance, authenticity and political neutrality, but the limitation of participating nodes is still a concern. The scalability of Blockchain is highly dependent on restoring the network’s trust by validating each transaction, which is technologically difficult and a few more ICOs crashes away.
The Bitcoin volatility is likely to get worse, and the altcoins are slowly getting into the death cycle. This means that we can expect some more crypto funerals likely in 2019, and investors should be extra-cautious and vigilant while investing their money in the industry, throughout the year.