This article basically just restates all the old criticisms of Bitcoin without adding anything new.
He say’s it’s all speculation: isn’t everything, really? Sure, VT is great, but you’re really just betting that the world’s stock market will be worth more to someone else in the future. You’re betting that the companies that it’s made up of will continue to produce things people want and can pay for. I wouldn’t bet against you, but don’t kid yourself thinking it’s a sure thing.
Like a piece of a profitable business or a rentable piece of real estate. An investment is something that has intrinsic value
A profitable business can become worthless really fast, and the same can happen to a piece of real estate. There’s no such thing as an intrinsic value of something, it’s only value is how badly someone else wants it. Sure, you could argue that the value of a business is it’s liquidation value if you were to sell everything, but even that assumes someone would want to buy it.
Next he goes with the classic “blockchain good, bitcoin bad” argument, which demonstrates a lack on understanding of both. The blockchain is only useful because it’s secured by miners that earn bitcoins in exchange. Here’s a great talk from Andreas Antonopoulos that explains how the two are intertwined.
The Cancer-Pill analogy is completely ridiculous and demonstrates a huge lack of understanding on the topic, bitcoin is not like that in the slightest. Andreas’ Internet analogy is way better: blockchain is kind of like TCP/IP and bitcoin is the Internet. Sure, the TCP/IP is open source and anyone can run their own network, and that’s useful on it’s own. In fact, we’re all using separate networks right now. The real value of the Internet is that it allows all those networks to talk to each other and all of us to interact.
You’ve got Bitcoin with a market value of $234 Billion Dollars, then Ripple at $92 billion with Ethereum right behind at $85,792,800,592.
These are preposterous numbers. The imaginary value of these valueless bits of computer data represents enough money to change the course of the entire human race
Seriously? If those numbers are preposterous, this is going to blow your fucking mind. Jeff Bezos could literally buy the entire market cap of the third largest cryptocurrency right now, and still have money left over to buy all of Litecoin. If he got together with Bill Gates and Warren Buffet they could buy all of Bitcoin just for fun.
Anyway, the way cryptocurrency market cap is calculated right now is basically useless. If I start my own cryptocurrency right now with 100 billion tokens and sell one to a friend for 2 CHF, my cryptocurrency is suddenly the second biggest. We certainly need better metrics.
Government-issued currencies have value because they represent human trust and cooperation. There is no wealth and no trade without these two things, so you might as well go all-in and trust people. There are no financial instruments that will protect you from a world where we no longer trust each other.
Wrong. Government-issued currencies have value because we had nothing better. History is rife with examples of governments breaking that trust. Bitcoin is the financial instrument that will protect you because the whole point is that you don’t need to trust anybody else.
So, Bitcoin is a protocol invented to solve a money problem that simply does not exist in the rich countries, which is where most of the money is. Sure, an anonymous way to exchange money and escape the eyes of a corrupt government is a good thing for human rights.
Just because the (now) rich countries haven’t abused their power lately doesn’t mean they won’t or can’t. If you don’t agree, please send me all your money. I promise I’ll give it back whenever you want it, I’ve never done otherwise!
Let’s get this straight: in order for Bitcoin to be a real currency, it needs several things:
- easy and frictionless trading between people
Bitcoin is already easy and frictionless. You can install a wallet on your phone and receive bitcoin in minutes, no need to go to a bank to open an account, etc. You can transfer money 24 hours a day, every day, all over the world, nearly instantly. I’m not sure what else you want.
- to be widely accepted as legal tender for all debts, public and private
Not really true, you just need to be able to convert it to other currencies as needed.
- a stable value that does not fluctuate (otherwise it’s impossible to set prices)
This will come with scale, the market right now is tiny.
Bitcoin has none of these things, and even safely storing it is difficult (see Mt. Gox, Bitfinex, and the various wallets and exchanges that have been hacked)
Yes, being your own bank is difficult and this is certainly something that needs to improve. You’ll always have the option of someone else securing your bitcoins for you, of course, but it’s a trade-off.
The second point is also critical: Bitcoin is only valuable if it truly becomes a critical world currency.
Demonstrably not true. CHF is valuable even though it’s not a critical world currency and it isn’t accepted as legal tender in most of the world. That doesn’t make it worthless.
Also, a currency should not be artificially sparse. It needs to expand with the supply of goods and services in the world, otherwise we end up with deflation and hoarding.
A currency certainly does not need to expand with supply, that’s how you end up with inflation and no savings. Anyway, Bitcoin is inflationary until all the bitcoins are mined, sometime in 2140. After that, the monetary supply is fixed.
It also helps to have wise, centralized humans (the Federal Reserve system and other central banks) guiding the system. In a world of human trust, putting the wisest and most respected people in a position of Adult Supervision is a useful tactic.
Yes, it would be nice if people were infallible.
The world’s governments are not going to let everyone start trading money anonymously and evading taxes using Bitcoin. If cryptocurrency does take off, it will be in a government-backed form, like a new “Fedcoin” or “G20coin.” Full anonymity and government evasion will not be one of its features.
Good thing Bitcoin didn’t ask for permission, then.
Basically, the only thing this article gets right, IMHO, is:
- Bitcoin may not be the one cryptocurrency to end all the others, but it certainly has the first-mover advantage and it’s the most likely candidate.
- Cryptocurrencies are a volatile asset class right now, and should be treated as such.
- It’s a very young market and it’s sort of like the wild west: beware of scams, inform yourself as much as you can and don’t take risks you can’t bear.
If you want a much more informed opinion on the future of cryptocurrencies, I recommend this article.
And if you want to understand more of the importance of bitcoin, I highly recommend another Andreas Antonopoulos talk, Peer-to-Peer Money in a Historical Context.