Whether or not Bitcoin will survive in the long term is a highly polemic topic. Below are common arguments against Bitcoin and their respective responses.
1. Bitcoin is often compared to gold in terms of being a store of value. But gold has its own intrinsic value, which bitcoin does not contain.
Response: Gold’s intrinsic value is extremely low compared to its price. The main contributor to gold’s price is as a measure of a store of value; the same argument can be applied to Bitcoin.
2. Adoption of near-perfect substitute AltCoins creates a potentially unlimited amount of bitcoin. The entire concept of scarcity which is required for a currency is destroyed if there are a potentially unlimited amount of bitcoin.
Response: Network effects mean that once Bitcoin is adopted, it is very unlikely that substitute Altcoins will be. Network Effects are explained at the bottom of this page.
3. There is a lack of governmental control on Bitcoin.
Response: Bitcoin is meant to be decentralized, so this actually means Bitcoin is achieving its purpose. Secondly, Government control is becoming increasingly important in Bitcoin’s future with things such as BitLicense, designed to provide licenses for Bitcoin merchants.
4. Most people holding bitcoin are holding it to speculate, not to actually use it.
Response: While this critique is true, there has been a shift from 95%/5% to an 80%/20% speculation to payment ratio, according to a co-founder of CoinBase. As this trend continues, more people will hold bitcoin for its transactional power.
5. Bitcoin is used for several illegal transactions.
Response: Silk Road has been much more inactive after its past shut down, and the co-founder of CoinBase predicts that illegal transactions account for <1% of all transactions.
6. Bitcoin has still not been accepted into the general public.
Response: The projection of how new technologies are adopted by the general public follows a famous curve known as the S-curve for its shape. Because Bitcoin is still a foreign concept to the general public, I would project that it is between the “Early Adopters” and “Early Majority” stages of growth.
In addition, the question of when Bitcoin will reach mainstream adoption can be responded to by Network Effects. Network Effects claim that once there are a critical mass of users or consumers, the technology will take off. Right now, Bitcoin’s growth is slower because it has not reached a critical mass of consumers. As such, merchants are not as incentivized to accept Bitcoin. Having fewer merchants accepting Bitcoin decreases the likelihood that a consumer will switch to using it. However, this feedback loop is positive and the amount of people using Bitcoin is increasing, so we can expect a future critical mass takeover. The network effect is shown below: