... Bitcoin Is Also SLOW and EXPENSIVE

The new bitcoin exchange has opened, and the price of bitcoin is closing in on $20,000. The price is still fluctuating wildly, but my guess is that enough suckers investors will bite and drive the price over the magic threshold in the next month.

But is bitcoin really worth anything? It currently has two extremely serious problems that make useless as a practical payment system.

The first is that is is extremely slow. Due to the nature of the blockchain, the system can process only three to seven transactions per second. That's for the whole planet! Credit card companies like VISA, Mastercard, American Express, Discover, etc., process hundreds of thousands of transactions per second in the aggregate.

The second problem is the high transaction fees. The average fee has jumped around from $6 a week ago to to $26 on Friday to $20 on Sunday. You can pay a lower transaction fee if you're willing to wait several hours, but if you want fast turnaround you pay through the nose. This has drug dealers and hit men hopping mad.

Imagine what buying a pizza with bitcoin is like: you place the order, and if you want the pizza now (and who doesn't?), you have to pay a transaction fee that's more than the cost of the pizza. Or you can wait several hours for a lower fee, and get your pizza at midnight, or four AM, or the next day.

Now, a stupid investor will think: who cares? I don't need to exchange bitcoin in a rush! I can wait a few hours to sell my gold bars, what's the big deal with slow bitcoin transactions?

In this day and age, liquidity is everything. The stock market is ruled by computerized trading systems that depend on microsecond to microsecond fluctuations in stock prices. That means that big traders will pay to ram their trades through quickly, jumping to the front of the queue, leaving small fry stuck waiting. If there's enough traffic, you could conceivably wait days. The price of bitcoin could change by a thousand dollars by the time your transaction is processed. Pretty sweet, huh?

There are technical changes that may mitigate these problems, though they sacrifice some of the supposed advantages of bitcoin. But the bitcoin community is extremely fractious, and no one will agree to anything. So there will be a bunch of different solutions implemented by a bunch of different people with varying levels of integrity and competence.

Which means that there are certain to be a lot more spectacular bitcoin system crashes, gigantic heists and bankruptcies.