Lupu Elena

Grupa 1008

5 Big Questions for Bitcoin in 2016

Trying not to procrastinate or to ask the general questions about bitcoin in the year
2016, I will ask the most important 5 questions, while not emphasising on the prognostics and
offering to the public an elemental approach to the state of the bitcoin in the year of 2016.
1. How will scalability be solved?

As a coin that has transactions showing no sign of abating, its problem is reaching
the limit regarding data blocks. This not only it is happening at a fast rate, so close that in
some circumstances might be considered a close possibility and as such, this will attract the
reevaluating of bitcoin regulations and its fundamental rules.
At the moment, the important question is not how bitcon is scaled, but whether it is
allowed to scale without a dogfight.
Currently, the major four ways of scaling bitcoin are: by lightning networks, by
sidechains and by off-block chain transactions, batched by third parties, or by increasing the
block size.
In the next few lines we will try to analyse the major ways of scaling the bitcoin.
In this case, the lightning networks and the sidechains arent prepared for an
elemental role, and most developers would admit that the increasing of scaling by third
parties is against the bitcoins intedend purpose.
The consequence of this problem is that, by mid-2016 it will be either stop-gap
resolution to increase the block-size,or a spike in bitcoin transaction fees for small
transactions.

So, now, the last question that remained to be asked is: will the Bitcoin Core block-
size limit increase or remain at 1MB?

2. Will reward halving affect price?

Believing that the cooler heads are prevailing the block-size debate and a consensus
regarding the first question is made before the networks fracture and at the same time, an eye
needs to be kept on the bitcoin price and the mining incentives over the next several months,
it can be considered that the bitcoin reward subsidy is scheduled to go by 50. As a natural
consequence of this, it is espected that the small miners will be dropping out of the market
and the bitcoin price and the curbing of mining difficulty will increase, so will do the fees for
transactions.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

3. Will bitcoin platforms attract developers?

Every major IT company is developing a platform for bitcoin and its transactions, but,
in reality, there are only two bitcoin platforms: Coinbase and 21 Inc.

Between these platforms, 21 inc stands out as the one fiat-free, that wont risk to
affect the business if the programmer misuses the product.

21 inc isnt even transacting in bitcoin, but they are selling the hardware to create
bitcoins, so they are not interested with what the users do with their coins.
This is a great solution for a platform, because it regulates the costs.
According to CEO Balaji Srinivasan's own admission: the important element to the
success of bitcoin is the idea that bitcoin generated by mining is more convenient than the
bitcoin bought at market price.
When these two possibilities arise, the controversy will surround the choice between
acquiring bitcoin by on-device mining or by creating and funding a wallet.
Both of these major bitcoin bases have their downfalls, for example building on Coinbase
might be extremely risky and expensive, whereas the 21 might be downright expensive.

4. Will we see a killer app?

Lets forget about the problem of viable bitcoin platforms and just analyse if there are
any viable applications for bitcoin.

Compared to the traditional applications and methods of transactioning . For instances

the credit cards offer better consumer protection and rewards and can be used for most
transactions, alike bitcoin, excepting the ones outright ilicit or on the gray market, where
bitcoin transactions might be increasing.
Also, for most of the clear, developed economy there are other applications that
function perfectly well, for example; Venmo for peer-to-peer payments and TransferWise for
international currency exchange.

If any of the new applications for Bitcoin or the old ones will not introduce a new
function , we are expressing our skepticality regarding the future of bitcoin applications and
the development of bitcoin on the consumer market.

5. Will we see autonomous transactions?

The viability of bitcoin micropayments in app has been questionable for some time

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

The first issue that we are trying to overcome is the mental accounting barriers.This
barrier consists in if we have the mental ability to distinguish between small amounts in a
single payment, for example 0.05 and 0.10

Also, another issue to transactions is the profitability of content platforms spending time and
energy accepting and supporting bitcoin transaction, when the users of bitcoin count a few
hundred thousands.
The third registred problem is the block-size issue that could render micro-payments
as uneconomical for the bitcoin users.
There is another situation regarding the computer consumers. The mental banking activity
isnt hard for computers, and using bitcoin or any kind of digital coins is easy for this kind of
a system.

In the end, we can say that the everyday need, caused by smart devices could oblivate
the need for consumers, as with the right supplier relationship, it costs less to acquire a new
device as a customer than a new human customer.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

scalability
/skelblt/
noun
1.

the ability of something, esp a computer system, to adapt to increased

demands

All this, while remaining compatible with their IT departments' demands forsc
alability and custom implementations.

dogfight
[dawg-fahyt, dog-]
noun
1a violent fight between dogs.

2.a fight between warring fighter planes.

3.any rough-and-tumble physical battle.

verb (used with object), dogfought, dogfighting.

4.to engage in a dogfight with.

verb (used without object), dogfought, dogfighting.

5.to engage in a dogfight.

If that's not elite enough, the national champion has to dogfight its way
through six games.

Fiat
noun

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

1.

an authoritative decree, sanction, or order:

a royal fiat.

2.a fixed form of words containing the word fiat, by which a person inauthorit
y gives sanction, or authorization.

3.

an arbitrary decree or pronouncement, especially by a person or groupof per

sons having absolute authority to enforce it:

The king ruled by fiat.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

There have already been dozens of 2016 prediction lists emanating from the broader bitcoin and
blockchain community over the past several weeks, so I'll avoid contributing to the cacophony. After
the abysmal results with my personal predictions for 20142015, I've finally learned to ask more
questions and offer fewer forecasts, anyway.

Instead of prognosticating, I'll offer 10 simple questions for the bitcoin and blockchain industry going
into this year.

Next week, I'll address the broader blockchain ecosystem. This week, I've got five questions for
bitcoin in 2016:

1. How will scalability be solved?

The growth in bitcoin transaction volumes shows no sign of abating, and yet the 1MB block data
limit is no closer to being raised than it was six months ago. Whether and how it is raised (via hard
fork or changes to Bitcoin Core) will have lasting repercussions, and changing one of bitcoin's
fundamental rules will have unintended, unpredicted and perhaps negative consequences.

One of bitcoin's earliest contributors has now written off bitcoin as a failed experiment.

So it helps to remember that the important question this year is not necessarily how bitcoin is
scaled, but whether it is allowed to scale without a dogfight.

There are currently only four ways to scale bitcoin today: via lightning networks, via sidechains, via
off-blockchain transactions batched by third parties (eg: Coinbase), or by increasing the block-size.

Lightning networks and sidechains aren't yet ready for prime time, and most technologists would
agree that increasing the clout of third-party transaction processors goes against bitcoin's intended
design. No offense to the segregated witness enthusiasts, but that doesnt sound like a true scaling
solution either more like an optimization.

This means that by mid-2016, we'll either see a stop-gap resolution to increase the block-size, a hard
fork, or a spike in bitcoin transaction fees for smaller transactions. All have their associated risks.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

So heres my question: will the Bitcoin Core block-size limit increase or remain at 1MB?

2. Will reward halving affect price?

Assuming that cooler heads prevail with the block-size debate, and a consensus on scalability is
reached before the technology and its network fractures (a big assumption, to be sure), it will be fun
to watch what happens to the bitcoin price and mining incentives over the next several months.

For the second time since bitcoin was released into the wild, the bitcoin mining reward subsidy is
scheduled to halve around July 2016, from 25 BTC to 12.5 BTC per block. Other things equal, this
should result in some combination of smaller miners dropping out of the market, a rally in the
bitcoin price, the curbing of mining difficulty increases, and greater interest from miners in allowing
bitcoin transaction fees to rise.

Economics aside, the broader community would benefit the most from a rally in the bitcoin price, as
the higher market cap would lead to additional liquidity, tighter trading spreads and lower volatility.

But has the halving been priced in during this three-month, 80% price rally?

3. Will bitcoin platforms attract developers?

Every tech company is building a "platform" when they are speaking with investors, but there simply
aren't many true platforms in bitcoin. I'd argue that there are currently only two nascent bitcoin
platforms worth watching in 2016: Coinbase and 21 Inc.

(Both happen to be the industry's investor darlings, so maybe there's something to this whole
platform thing.)

Of the two, 21 probably has the edge given the company is 'fiat-free' and won't risk jeopardizing its
business if a third-party app developer misuses the product.

21 needn't worry about what its users do with the virgin coins they mine on their devices: 21 isn't
even transacting in bitcoin, they're merely selling the hardware to create new bitcoins. Brilliant for
keeping regulatory costs both tangible (legal fees) and intangible (employee headache) down to
near zero.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

The Coinbase compliance team, on the other hand, is on the hook if apps built using Coinbase's
'wallet-as-a-service' promote money laundering or illegal money transmission.

That said, 21 may have to worry about the economics of its mining chips.

By CEO Balaji Srinivasan's own admission: "Crucial to [the success of bitcoin as a fundamental system
resource] is the idea that bitcoin generated by embedded mining is more convenientand hence
more valuablethan bitcoin bought at market price and manually moved over to the site of utility."

Early returns on these chips suggest that users would have to consider the marginal convenience of
acquiring bitcoin via on-device mining worthy of a ~10x (or greater) premium versus simply creating
and funding a wallet.

Building on Coinbase might be risky and expensive from a compliance perspective. Building on 21
might be just downright expensive.

4. Will we see a killer app?

Let's go one step beyond questioning whether there are any viable bitcoin platforms and ask simply
whether there are any interesting applications.

The industry's worst kept secret is that bitcoin remains a terrible currency for those with access to
only basic financial services.

Credit cards offer better consumer protections, rewards, and user experience than bitcoin for nearly
all purchases except for those in outright illicit or gray market industries like gambling and
marijuana.

For nearly all other developed economy use cases other than speculation, superior non-bitcoin
applications exist: Venmo for peer-to-peer payments, TransferWise for (some) international
currency exchange, etc.

Unless an application leverages functionality unique to bitcoin (multi-sig for escrow, nLockTime for
metered payments), I'm skeptical it will ever prove to be an interesting bitcoin application.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

If the killer consumer application has so far proven elusive, will 2016 be any different?

5. Will we see autonomous transactions?

The viability of micropayments as a killer bitcoin app has proven to be questionable at best over the
past seven years.

There's the issue of "mental accounting barriers" which were highlighted by cryptographer Nick
Szabo as far back as 1996 do we have the mental capacity to truly pay attention to the difference
between $0.05 and $0.10 in a single payment?

There's the chicken-and-egg issue of whether it is even worthwhile for content platforms to spend
time and energy accepting and supporting bitcoin payments when the community of active wallet-
holders is still somewhere in the mere hundred thousands globally. (Remember how little even the
most savvy promoters made from their bitcoin paywalls?)

And then, of course, there's the block-size issue, which, unresolved, would render micro-payments
uneconomical for consumers anyway.

Yet some of these critical issues seem to fade away when it comes to smart device transactions.

For one thing, mental accounting isn't very difficult for computers. And using a digital currency like
bitcoin for micropayments as a method for verifying the identity of a connected device or for
metering machine-to-machine transactions is more natural.

Embedding chips into sensors, phones, and other everyday smart devices at scale could also obviate
the need for consumers to explicitly opt-in to using bitcoin, while simultaneously resolve the
demand issue: with the right supplier relationships, it costs less to on-board a new device 'customer'
than a new human customer.

Data accesare: 8 martie 2016

Lupu Elena
Grupa 1008

Data accesare: 8 martie 2016