Bitcoin and Why Cryptocurrencies Will Fail

bitcoin

a new creation that is going to change

our everyday

day finance and the way how we use our

money

it was created by an anonymous person or

a group of people

working under kryptonym of satoshi

nakamoto

every day we hear in the media how good

they are

and how many possibilities

cryptocurrencies can create however

what about the negative sides bitcoin

has already been once classified as a

speculative bubble

yet a new frenzy in 2021 is occurring

recently elon musk made a huge bet

by buying almost one and a half billion

dollars worth of bitcoin

and reported that his company tesla

is going to accept payments made by

cryptocurrencies

it is of course set to increase the

demand for

a currently speculative market to become

a real one

but there are some fundamental problems

that will cost that bitcoin and other

cryptocurrencies

will fail one day first of all

i need you to ask your question if you

were

ever able to actually buy anything with

bitcoin

i guess most of you have never even

heard of places

where you can buy things using it

and if you did then you of course heard

about the previously mentioned tesla

probably domino’s pizza and of course

darknet

most of the illegal internet sites

operating in the darknet

which sell drugs guns

and child pornography operate by bitcoin

payments

and it is done because of its anonymity

this anonymity that is supposed to be

the biggest advantage of bitcoin

over other tradable goods is actually

helping

organized crime groups terrorists

and countries willing to evade

international sanctions

as to transfer their money from one

place to another

without extensive money laundering while

many people

like comparing bitcoin to gold when it

comes to illegal trade

there are some fundamental differences

first of all our yellow shining resource

is heavy and hard to transport

and in order to finalize a transaction

you need to meet the recipient in person

here the advantage of bitcoin being a

pure

line of ones and zeros comes to play

you can buy absolutely anything you need

to commit a crime

by just one click on your phone and no

federal authority will be informed about

your potential illegal transaction

another problem with bitcoin is its lack

of cyber security

while you are making a transaction

through a centralized institution such

as a bank

there are several procedures they need

to follow as well as

regulations in order to reduce any risk

of theft

but when it comes to bitcoin these

regulations barely exist

until the 2008 until 2018

more than 980 000 bitcoins

were stolen just from crypto exchanges

and

for today’s bitcoin value it is more

than 50 billion

dollars and while there were some

attempts

to regulate the crypto trade most of

them are still inefficient

and leaky thus the concerns still remain

and further action is still needed

the most well-known country for banning

crypto trade

is china it has completely banned

initial coin offerings as well as it

only allows exchanges

to facilitate trade not to buy or sell

any

chinese financial institutions are also

forbidden from

any sort of trade regarding

cryptocurrencies

despite all these measures crypto mining

has not been addressed until recently

oversimplifying it a new

bitcoin is created every 10 minutes

and people with decryptive algorithms

are trying to guess its serial number

while in 2015 only few people

knew about cryptocurrencies there was

much less

crypto mining centers that actually

competed for getting one

but while the demand went up and up and

up

more new crypto mining centers opened

and

your chance to being the chosen one got

lower and lower

and that is why crypto mining centers

have increased their computing power in

order

to become the chosen one the one that

will receive bitcoin in the end

and this drives the energy consumption

to insane levels university of cambridge

center for

alternative finance calculates that

solely bitcoin energy consumption

is around 130 terawatt hours

and this is equivalent to the

consumption of developed nations

such as sweden norway or the united

arab emirates and this is only bitcoin

with exclusion of ethereum and other

cryptocurrencies

as most of the world energy

still relies on heavily polluted fossil

fuels

we can estimate that solely bitcoin

consumption

is around 0.43 gigatonnes of carbon

dioxide

and just so we can compare it it is more

than most the european nations produce

and something close to australian

emissions

this is not a way to how to build

a new and revolutionary currency for the

21st century

while we are already struggling to lower

our emissions and save

us from the climate disaster

but let’s get back to china recently

there was a change in chinese politics

and now they’re trying to favor

favor renewable energy sources

in the region of inner mongolia no new

crypto mining centers will be opened

and the currently existing ones will

have to be shut down

as in order to cut down on the

strategically unneeded power consumption

in order to achieve sustainability and

the main question arising from it is

will it become a global trend or will

the chinese province be an exception

another aspect that determines the

strength of the currency

is its stability and bitcoin lacks it as

we can see there are some significant

fluctuations in its course

and no one can accurately predict its

price

in the next two months let me ask you a

question

would you be willing to accept a payment

made by a friend who owes you a hundred

dollars

in an asset that could be worth two

hundred dollars

or four dollars in the next two weeks

probably most of you would answer no

as people tend to have risk adverse

preferences

and getting paid in such an asset would

be extremely risky

there is no central bank standing behind

it that could guarantee

that the future exchange rate is going

to be at least close to the one today

it is so it’s it is all set by people

willing to buy and sell which as history

shows us

can change drastically over time

following this instability bitcoin lacks

a crucial aspect

needed for it to become an international

currency

which is a popular argument made by

bitcoin enthusiasts

after all of you heard what i said

probably

most of you wonder why is the price so

high then

and well the truth is i only touch the

negative aspect and barely touch the

positives

which there sure are no matter the less

remember that speculative bubbles have

been occurring throughout the history

starting from the fabian’s mississippi

bubble that nearly overturned the french

economy in the

18th century to some more recent ones

such as the dot-com bubble in the 90s

and

the housing bubble in the early 2000s

and currencies are no different and the

only

question is when will someone press the

check button again

as for a commodity with no future

bitcoin will fail one day

and die naturally or by dying under the

needed regulation