The Failures of Bitcoin and Other Cryptocurrencies
Cryptocurrencies are the Latest Market Fad
Cryptocurrencies have taken the populous by storm in the past months, but not because it offers a new revolutionary way to conduct exchanges of goods. It has captivated the masses because of how profitable it has become to sell Bitcoin. Cryptocurrencies have become another product to be bought and sold. In hearing about it, most stories that are talked about involve someone buying Bitcoin years ago only to now become rich by selling them off.
Even Oldenburg, Bitcoins.com co-founder, has sold all his Bitcoins in favor of a new cryptocurrency, Bitcoin Cash. As he says himself, Bitcoin has essentially become a digital product to be traded as opposed to something you use. As such, because of these new players in the world of digital currencies most cryptocurrencies have become seen as products rather than a new form of legal tender. It isn’t a coincidence that the fast increase in the price of Bitcoin is because in 2017 major investors and Corporations had begun intrigued by the concept.
We’re basically consuming thousands of times more energy for something we can already do at the moment – we can already do transactions, we don’t have to use bitcoin if we trust our current system. I don’t see how bitcoin justifies its energy use at the moment, given that most people do have a certain level of confidence in the current system— Alex de Vries
The Energy of Bitcoin
The sudden drastic rise in its value, or better yet price, is evident of users seeing it as a good, a product to be bought and sold. However, while this problem is that of public opinion and belief in cryptocurrencies, another issue presents itself as a physical liability. Many analyst and experts are saying that Crypto “mining” will become a drain on the worlds power supplies. This has become such an issue that Digiconomist created a Bitcoin energy index that tracks how much energy Bitcoin alone is using.
Some estimates include using all the worlds electricity by 2020. Others like me, such as Alex de Vries question the purpose of Bitcoins. As he states, “We’re basically consuming thousands of times more energy for something we can already do at the moment – we can already do transactions, we don’t have to use bitcoin if we trust our current system. I don’t see how bitcoin justifies its energy use at the moment, given that most people do have a certain level of confidence in the current system.”
As it stands, Bitcoin does not present itself as an alternate option in the faith-based monetary market. In fact, it is arguable that it is currently a worse option because of the volatility, high value, high cost of mining rigs, and energy consumption. Even then those with only a few rigs will have no chance against the massive server farms that now exist solely for the purpose of mining.
The Promises about the Future
Many proponents of cryptocurrencies try to convince the public why they are and how they will become the future of modern economics. They explain that because of its decentralized, peer-to-peer, use of cryptography, cap off only 21 million bitcoins in circulation, and no existence of a manipulating force such as a central bank or Government entity, it is a safe, and future alternative to physical legal tender currently controlled by centralized authorities.
A big issue many people are forgetting is that Bitcoin is still essentially a FIAT currency. Simply speaking the people of the world act as the authority of the decentralized digital currency and they decide what it’s worth. The only difference that cryptocurrencies have is the artificial scarcity, as the number of Bitcoins in existence can only be 21 million. This includes the Bitcoins that are seemingly gone because people have “lost”. Reported on in 2015 by Coinbuzz, “According to The Genesis Block 10% of Bitcoins haven’t been active since 2012, and a substantial 35% haven’t been spent since 2011. This second number is most likely to consist of lost coins.” The artificial cap on the number of Bitcoins is even lower than 21 million because of this. It may not be a significant number of Bitcoins today but as time goes on the amount that is lost in the void will only increase.
We as a Population Need to Decide
With that comes the central point of the biggest issue I foresee. The explosion of technology in the 21st century has made productivity sky rocket. The fundamental point of advancing technology is, and always should be, to increase the benefit to it’s users. Emerging technologies should have a direct purpose that improves and makes the previous form obsolete to further simplify and make the lives of people easier. Cryptocurrencies in their current state offer no revolutionary advancement in the field of monetary transactions. Additionally, the volatile nature does not make it an easy source for the average person to use it as a form of currency.
We as a population must decide what the economies of the future will be like and how they will take shape. Creating new forms of currency will not enrich the lives of the masses that currently struggle to live a decent life. Cryptocurrencies have highlighted the insecurities of wealth and the obsession of looking for an easy out in the current economic situations. It is time for the economies of the world to match the pace that technology is going with automation, but creating a digital currency is not the solution to such a large problem.