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