When bitcoin investors discuss the long-term potential for the cryptocurrency, one of the most popular words to come up in the discussion is “disruption.” Bitcoin bulls argue that cryptocurrency will turn the global financial system completely upside down. However, KeyBanc analyst Ben Wilson said this week the bitcoin blockchain story may be more about creation than destruction.
According to Wilson, the blockchain mining networks created by cryptocurrencies like bitcoin and Ethereum will be the starting point for a brand new generation of intelligent applications.
“The applications built on top of these exotic compute grids (many by incumbents) will likely comprise the biggest near- to medium-term impact from blockchain and crypto, in the form of changed competitive landscapes and new company formation, rather than disintegration of existing corporate power structures and displacement of the global fiat currency system,” Wilson wrote.
Wilson says the current mining network could eventually transition into a collection of artificially intelligent supercomputers with unprecedented security.
He says these blockchain-based applications are coming, regardless of whether or not bitcoin and ethereum survive as cryptocurrencies.
The Cryptocurrency Problem
In fact, Wilson says cryptocurrency’s main selling point, decentralization, is inherently flawed on a larger scale.
“The more ‘critical mass’ it achieves, the more middlemen (e.g. Coinbase), influence from extant power brokers (e.g. CBOE futures trading), and scrutiny from law enforcement and regulatory bodies,” Wilson said. He also said transaction fees will likely continue to scale right along with global usage. Wilson says bitcoin will struggle to function as a high-throughput, decentralized currency.
Ironically, increasing regulation and rising fees may ultimately push users away from bitcoin and into other less-popular cryptocurrencies which may be doomed to repeat the same pattern.
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