Cryptocurrencies are not new to facing criticism from the government. The former chairwomen of the Federal Reserve, now Treasury Secretary, Janet Yellen has recently repeated the regulators’ favourite mantra about Bitcoin being a highly-speculative, inefficient form of digital currency that is primarily used for illegal transactions.
The occasional hostility governments might harbor towards cryptocurrencies has become quite commonplace. The antagonism between central authorities and the first decentralized peer-to-peer payment network that is powered by its users is quite understandable. It is no secret that Bitcoin, and DeFi at large, threatens existing power structures.
Secretary Yellen has become the first person in American history to lead the most powerful economic bodies in the Federal government of the United States: the Treasury Department, the White House Council of Economic Advisers, the Federal Reserve and the Treasury Department.
Yellen has been talking about Bitcoin with some reservations for some time now. For example, not so long ago, while still serving as Federal Reserve chair, she called this digital currency a “highly speculative asset.” According to the Secretary, “Bitcoin at this time plays a very small role in the payment system. It is not a stable source of value and it does not constitute legal tender.”
But however “inefficient”, “speculative” and “small” the first cryptocurrency is, it has recently set the community’s imagination ablaze once again, and ironically, the reason for that was an extremely efficient and stable transaction. Somebody, presumably, Bitfinex, transferred 88857.24519026 BTC (about $4.5 billion) to another wallet for a fee of just $21. Now, what central bank can do that?
And yet, with the help of the Lightning Network, the Bitcoin blockchain can do even more. The Lightning Network is a layer-2 scalability solution proposed and implemented after Bitcoin was launched, in order to lower fees and enable fast transactions among participating nodes.
The layer is basically organized in the form of private channels between transactors, so they can send and receive an unlimited number of transactions without waiting for confirmations or paying fees to the miners. The fees should be paid just twice when creating a channel and when transferring it to the blockchain.
So while Bitcoin adds cutting-edge features and explores atomic swaps, let’s take a look at what’s happening in the Federal Reserve field. Not so long ago, it suffered an extensive outage in multiple payment services, including a system that banks and businesses rely on to transact trillions of dollars on a daily basis. The Fed blamed an “operational error” to cause the incident, however, this operational error was the reason why businesses and government agencies were waiting for days to transfer vast sums of money across the US banking system. More than $3 trillion was transferred daily using Fedwire during the fourth quarter.
The Bitcoin blockchain was never successfully hacked and with the Lightning Network implementation, the cost of transactions is negligible, compared to legacy transactions. To that end, it is time to finally move on from the Silk Road stigma and face the music (in the words of Tina Turner:
Bitcoin is simply the best, better than all the rest.