Bitcoin uses massive computational resources to do auditing, accounting and secure the network. But it is naive to imagine the banking industry accomplishes the same functions for free. To the contrary, the global government fiat currency systems requires literally millions of people and the attendant buildings and energy drain on their millions of computers and physical infrastructure, to (in a more manual, error-ridden and vulnerable set of processes) do the same functions of auditing, accounting and securing funds. Once you realize this you realize the great step forward that Bitcoin represents.
Bitcoin is, if you’ll excuse the expression, the gold standard among cryptocurrencies. And blockchain has tremendous potential. But determining its intrinsic value is, to me, quite a puzzle. Is it a bargain at $100,000, or extremely overpriced? Sorry, but if you can’t value something in a way replicable by others, it’s speculation.
As to the case for cryptocurrency more generally, I see two compelling uses. The author mentioned one - it’s a great way for criminal enterprises globally to launder their ill-gotten gains. And that’s the good news, because the second one is worse. Governments could compel all currency to be converted to crypto. They would then know where every dime of its citizens is located, and they could help themselves to your savings at will. How much do you trust Washington to look out for you? Yeah, me neither.
Hence the popularity of Bitcoin, where no government control of assets is possible. Do not confuse it with a digitized version of the dollar which could be completely controlled by the governments.
That's a very good point that I also have wondered about. How many people want to have every transaction they make be tracked by the government? Isn't that a little 1984-ish?
One of the things I dislike about crypto is the enormous amounts of energy it uses. Given that global climate change is causing chaos in weather that's creating more and more destruction, that's a HUGE consideration. No matter how cool you think crypto may be, it's not going to be helpful when a town is underwater or burned down due to extreme weather that climate change clearly causes, and will continue to cause if we don't learn different ways. Crypto just exacerbates that.
There's also a social justice aspect to this, because crypto organizations can use tons and tons of energy and rely on infrastructure in a small town and yet provide no jobs or benefits to that town.
>Crypto offers a new channel for money to move seamlessly and securely,
In other words, crypto is a temporary work around because banking system is stuck at 1970 technology level. Computers have long allowed for seamless and secure bank to bank transactions. Update banking system and this advantage of crypto disappears.
>Bitcoin and crypto used in dark-web transactions for drugs, money laundering and extortion
In other words, crypto is a temporary work around because banking system has lots of rules. Governments will not tolerate evading their rules forever, at which point this advantage of crypto disappears.
>goal was to create a currency that couldn’t be stolen from hard-working families,
In other words, crypto is a temporary work around because banking system doesn't allow these hard-working families to easily set up accounts in safe jurisdictions. Some safe jurisdiction will inevitably jump into this market for seignorage profits. Why give $3 trillion of seignorage to the bitcoin creators when you can seize it for yourself? UK, for example, is a safe jurisdiction, has existing international banking expertise, is allowed to skate at the edge of money laundering rules because it is the USA attack dog, and could really use that $3 trillion in seignorage. Just allow all these families to set up UK pound bank accounts remotely and screw the know your customer rules. At which point this advantage of crypto disappears, because a UK pound bank account is far more trustworthy than bitcoin. (Obviously, USA dollar bank account even safer, but $3 trillion seignorage not as significant to USA as UK and USA always slower than UK in banking innovation.)
You failed to mention the enviromental cost
Bitcoin uses massive computational resources to do auditing, accounting and secure the network. But it is naive to imagine the banking industry accomplishes the same functions for free. To the contrary, the global government fiat currency systems requires literally millions of people and the attendant buildings and energy drain on their millions of computers and physical infrastructure, to (in a more manual, error-ridden and vulnerable set of processes) do the same functions of auditing, accounting and securing funds. Once you realize this you realize the great step forward that Bitcoin represents.
Bitcoin is, if you’ll excuse the expression, the gold standard among cryptocurrencies. And blockchain has tremendous potential. But determining its intrinsic value is, to me, quite a puzzle. Is it a bargain at $100,000, or extremely overpriced? Sorry, but if you can’t value something in a way replicable by others, it’s speculation.
As to the case for cryptocurrency more generally, I see two compelling uses. The author mentioned one - it’s a great way for criminal enterprises globally to launder their ill-gotten gains. And that’s the good news, because the second one is worse. Governments could compel all currency to be converted to crypto. They would then know where every dime of its citizens is located, and they could help themselves to your savings at will. How much do you trust Washington to look out for you? Yeah, me neither.
Hence the popularity of Bitcoin, where no government control of assets is possible. Do not confuse it with a digitized version of the dollar which could be completely controlled by the governments.
That's a very good point that I also have wondered about. How many people want to have every transaction they make be tracked by the government? Isn't that a little 1984-ish?
One of the things I dislike about crypto is the enormous amounts of energy it uses. Given that global climate change is causing chaos in weather that's creating more and more destruction, that's a HUGE consideration. No matter how cool you think crypto may be, it's not going to be helpful when a town is underwater or burned down due to extreme weather that climate change clearly causes, and will continue to cause if we don't learn different ways. Crypto just exacerbates that.
There's also a social justice aspect to this, because crypto organizations can use tons and tons of energy and rely on infrastructure in a small town and yet provide no jobs or benefits to that town.
>Crypto offers a new channel for money to move seamlessly and securely,
In other words, crypto is a temporary work around because banking system is stuck at 1970 technology level. Computers have long allowed for seamless and secure bank to bank transactions. Update banking system and this advantage of crypto disappears.
>Bitcoin and crypto used in dark-web transactions for drugs, money laundering and extortion
In other words, crypto is a temporary work around because banking system has lots of rules. Governments will not tolerate evading their rules forever, at which point this advantage of crypto disappears.
>goal was to create a currency that couldn’t be stolen from hard-working families,
In other words, crypto is a temporary work around because banking system doesn't allow these hard-working families to easily set up accounts in safe jurisdictions. Some safe jurisdiction will inevitably jump into this market for seignorage profits. Why give $3 trillion of seignorage to the bitcoin creators when you can seize it for yourself? UK, for example, is a safe jurisdiction, has existing international banking expertise, is allowed to skate at the edge of money laundering rules because it is the USA attack dog, and could really use that $3 trillion in seignorage. Just allow all these families to set up UK pound bank accounts remotely and screw the know your customer rules. At which point this advantage of crypto disappears, because a UK pound bank account is far more trustworthy than bitcoin. (Obviously, USA dollar bank account even safer, but $3 trillion seignorage not as significant to USA as UK and USA always slower than UK in banking innovation.)
I learned a lot from this. Very clarifying.