Is Bitcoin Dead or Is It Just Underground?

Most people have heard of Bitcoin, but less fully understand it and even fewer have used it, so what is the future of online currency?

Leading economist Paul Krugman described Bitcoin as 'evil' in an article for the New York Times, saying its value is unsustainable, while Jeffrey Robinson compared it to a loaded roulette wheel. However, even he had to admit that the blockchain technology behind Bitcoin could change the world.

The price of Bitcoin

The online currency has undoubtedly experienced times of uncertainty. In 2013, it hit an all-time high value of around $1,000, before dropping to $770 per unit just a few months later. By October 2014, the value had fallen to less than $300, but since then its value has skyrocketed to over $2,000.

The technology behind it

However, no matter what its value, the technology behind Bitcoin has been thought to be the future of finance for a while now. The currency works using a 'blockchain' system, which is essentially an encrypted ledger stored on thousands of computers around the world.

This ledger is open and transparent, and anyone in a network can access it. However, this does not mean there is a lack of privacy; transaction details are encrypted using a method called 'hashing'. Adrian Nish, head of threat intelligence at BAE Systems, explained to the BBC: "You don't store details of the transaction, just the fact that it happened and the hash of the transaction."

This technology could be about to hit the mainstream. In early 2016, a report was submitted to the UK government exploring how blockchain could potentially revolutionise both public and private sector services. That July, a select committee was formed to discuss the potential uses of the technology.

The future of Bitcoin

The blockchain behind Bitcoin could offer a lot of potential, but there have been concerns about elements of it since the currency first launched in 2009. Currently, the 1mb limit on Bitcoin means it can only handle seven transactions a second. It's the scalability of this that has caused it to fail, according to leading Bitcoin developer Mike Hearn.

In a post on Medium, he explains that a new currency, which uses many of the same principles as Bitcoin, could be a success. There are many changes between Bitcoin and this new currency - called BitcoinXT - but the most important is that its block size is around eight times bigger.

This could give online currency a new lease of life, which, combined with uncertain economic times, may mean that Bitcoin is given a second chance.