Bitcoin Would Be Nothing If It Weren’t for The Dark Web

A few years ago, the price of Bitcoin had “peaked” at around $279.00, according to some.

This wasn’t long after the original Silk Road shutdown in 2013. The big question at the time was whether or not the digital phenomenon could survive without the fundamental support of illicit ecommerce.

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To understand why that is, it’s important to put into perspective just how much that illicit activity contributes to the utility, and therefore purpose of Bitcoin.

According to an article put out by Coinbase, “Combined daily volumes [on six drug markets] hit $650,000…researchers say the total is generally stable between $300,000 and $500,000 a day.”

Meanwhile, Bitpay, a legitimate payment processor that converts Bitcoin purchases into fiat, is allowing regular everyday customers to pay for online goods and services with the digital currency, as if they were using a credit card.

It has its largest merchant doing less than $500,000 daily. Do the math!

As it turns out, Silk Road was just one head of the hydra, and the dark web economy was not going anywhere.

Jeff Macke, a prominent panelist at CNBC’s Fast Money, haughtily declared on one episode of the show, “Bitcoin is dead!” This was followed by the stale affected laughter of agreeing panelists.

Fast-forward to 2017 and the virtual currency is up almost 1,000 percent from that day.
Nonetheless, that hasn’t stopped myriad commentators, journalists, pundits and businessman alike from hastily assuming the doom of Bitcoin—a pseudo-financial instrument that doesn’t elegantly fit the traditional models of financial analysis.

In fairness, the difficulties of evaluating the price behavior of something that is practically ethereal, decoupled from a real economy and so heavily underpinned by either underground illicit activity or speculation cannot be understated.

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Fair enough! However, it is important to consider that there has never been anything truly like Bitcoin, and so attempting to fit it into any mold or other would be akin to comparing apples to nanotechnology.

Bitcoin is really the only successful cryptocurrency that has not failed.

Just what is it with Bitcoin then? And on a price trajectory from zero to infinity, is enough being done to nurture a sustainable rise in value? The best way to achieve a sustainable rise in price would be to ask oneself, “Will this eventually be adopted by mainstream?” As of right now, the answer is “maybe” at the very best.

To understand why, let’s break it down into some key positives and negatives.

The Good, the Bad, the Ugly

view of a circuit board with a digital bitcoin projecting above
The digital phenomenon survived without the fundamental support of illicit ecommerce.
The strongest use-case for Bitcoin’s mainstream adoption is the relatively small cost of value transfer that it allows for (as compares with, as an example, sending money via Western Union or Moneygram).

It is a decentralized nature of payment settlement, meaning once a transfer is made it cannot be charged back like credit cards, and the fact that it cannot be counterfeited.

It is definitely important not to underestimate the tremendous economic benefits of such things, but to truly perceive those benefits in a real economy.

There appears to be some very big hurdles that have not been satisfactorily overcome: Difficulty of use, volatility, regulatory impediments to adoption and formative policies established by the software’s core developers.

From the above mentioned factors, the last one could heavily serve to limit Bitcoin’s growth in the long run. That’s because the foremost, “core” developers, which basically get to determine Bitcoin’s future.

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Form have favored a fee-intensive compensation model to miners who basically power the block-chain infrastructure.

This underpins the digital currency via energy-intensive computer processors—to give you the short and simple explanation without going into the ugly technical stuff.

The tendency, then, will be an ever-rising cost of that value-transfer capability.

To have a better idea of how that translates on a transactional level, consider the following.

Transactions with low fees can take more than a week to confirm (yes, it has happened to me), and priority transactions can cost five percent or more (yes, that too has happened to me).

That alone is enough to drive someone to say, “No thanks, I’ll use my credit card.” A long-winded, arcane doctorate thesis is not necessary to realize the simple fact that if the cost of transferring money via Bitcoin becomes too high, as compared to the alternatives.

If it takes too long to make a transfer without paying high fees, then the biggest argument in favor of its adoption dies.

Ultimately, a very—and I mean VERY—compelling reason must be maintained in order for mass adoption.

The best way going forward is for the business community, regulators and core developers to foster in as much as possible.

The positives of the digital currency are low fees, lax regulatory burdens, easier ways to buy and send Bitcoins.

Otherwise, it would eventually stagnate in the evolutionary doldrums; or, put differently, it would remain confined to special-use cases—the majority of which would be illicit commerce over the dark web.

The dark web’s economic powerhouse is the last line of defense for Bitcoin’s value.

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In a way, the dark web has always played a very integral role in preserving the survival and continuation of block-chain technology, which holds tremendous promise for the future betterment of society.

Human patience and curiosity alone would not have been enough to carry the digital currencies through.

Only one thing has remained constant: that some people still need to buy Bitcoin to get their cocaine.