The Blockchain pledges to cut costs and boost connectivity between customers and businesses around the world, but so far this potential goes largely unrealized. For reasons of cost, accessibility, and risk, Bitcoin is often slow. However, the technology could become widely accepted by improving one component—speed.
A Plethora of Platforms
Bitcoin platforms have a need for speed. But what are Bitcoin platforms? Typically, applications built on the blockchain (Bitcoin’s foundational technology) can use cryptocurrency in some capacity to power their transactions, and it’s to these kinds of projects that we refer. It could be an exchange, which allows millions of people from around the world to transfer fiat currency to and from a wide array of cryptocurrencies. It could also be a simple wallet application, which stores Bitcoin and other currencies safely.
As engineers and creatives devise new ways to use the blockchain, the kinds of platforms that exist become increasingly varied. It’s not just the Bitcoin blockchain that spawns new applications either. Ethereum is also a popular blockchain for building on as it provides developers the ability to run their projects with carefully programmed smart contracts. In all cases, though, speed is the one trait that will cause users to flock, or fly away, in droves. (See also: Bitcoin to Form a Third Currency. When Does it End?)
Hunting for Speed
Why is speed so vital to these kinds of platforms? There are several reasons, but they begin with Bitcoin itself:
1. Bitcoin is Slow
While Bitcoin loyalists might not want to admit it, the cryptocurrency’s blockchain is just about the slowest there is. This is caused by a confluence of factors: the size of blocks on the chain, the congestion created due to its popularity, and its community of somewhat disloyal miners.
The first reason is straightforward. For a successful transaction, the block that it is a part of must be mined. Small blocks and a static block-per-minute mining rate mean that more users quickly form a long line, waiting to get their digital hash ID processed. Miners understand these limitations, and often move their CPU power over to more profitable blockchains, worsening the issue. Platforms that can improve on these speeds, usually by building infrastructure that runs parallel to the chain itself, draw more users and encourage evolution in the industry.
Bitcoin is speeding up, especially with the implementation of Segwit and Segwit2x, events that changed the core algorithm to produce larger blocks. However, other technology is far outpacing Bitcoin.
2. Importance to Traders
At present Bitcoin users are largely engaged in widespread speculation. Though it has proven a good investment thus far, the immense volatility in the market and huge daily price swings make it a risky one as well. Most Bitcoin platforms create trading and arbitrage opportunities for those who are hunting value, and for this audience, speed means profit.
The market’s volatility creates new opportunities every second, especially with the recent popularity of ICOs (initial coin offerings). Traders using leverage cannot afford for their trade to lag even an extra second as it may risk thousands in fiat money. The faster one can buy into the latest trend, the more they stand to gain. A 3-hour confirmation time on your buy-in might represent $10,000 in missed profits.
3. The Competition Is Lacking
Despite the potential for speed with blockchain technology, popular exchanges like Coinbase and Kraken often go down during times of high volatility. Even when it’s smooth sailing, it takes days for purchased coins to land in users’ wallets
This not only hurts users; it also hurts the reputation of the entire community. This trend has showed that, given the technology to offer instant, free transactions, industry players will protract transactions on purpose and charge exorbitant fees. The chance to make money has proven more powerful than changing the world, for now. Only companies who choose to use the technology for speed (and thereby cost reduction), will alter the standard, and show the world that blockchain deserves a place. (See also: Why Is Bitcoin’s Value So Volatile?)