“Cryptocurrencies, although a seemingly interesting idea, are simply not fit for purpose. They do not work as currencies, they are grossly inefficient, and they are not meaningfully distributed in terms of trust.”
“Cryptocurrencies, although a seemingly interesting idea, are simply not fit for purpose. They do not work as currencies, they are grossly inefficient, and they are not meaningfully distributed in terms of trust.”
I love the “do not work as currencies” quote that people love to say… I’ve been using cryptocurrencies to buy products and services for years. Seems to work fine.
When I skimmed it, the paper was more specific about what doesnt work means. Wild shifts in value causing more holding than spending was one example. That’s also why every person I know IRL who does Bitcoin is a speculator or day trader.
I think the title is misleading. He just talks about Bitcoin and proof-of-work, but calls it “Risks of Cryptocurrencies”. If the title would be “The Risk of Bitcoin”, fair enough. The only purpose of Bitcoin is now to bring money from investors into the gamble, and the distribute the money onto other projects until there is one which figures out how to make blockchain-based currencies work.
I disagree that we should just give up on the idea. Imo, crypto currencies would let anybody take part of the system “capitalism” and therefore could improve it much faster and easier. Right now, to invest in a company, I need to go through a third party. Other investments are almost not doable for a working class person.
in my perfect world, every Dollar would be on the Blockchain, we have then much better tools to diagnose and monitor it and make it visible what’s going on. And then, slowly, we can distribute wealth to products and people who are doing more good then harm.
For this to work, of course, we need to improve crypto currencies (proof-of-* etc.) A LOT. But all I read is people complaining about the amount of money people put into Bitcoin, yet nobody sees how much money travels every day via the stock exchanges.
So yes, get the rich investors hyped, put their money onto the blockchain, use it to create better systems and then monitor money flows and direct money to better products and ideas.
… and also to, you know, pay for products and services.
So far, that “anybody” has been scammers, ransomware authors and other criminals. I’m not sure how “investing” in literal Ponzi schemes improves anything.
What’s wrong with that? The third party is legally responsible for the stuff. You can’t sue a trustless p2p ledger for accidentally burning your money.
Although I’m pro-bitcoin and disagree with this article’s conclusions, there are a lot of good points here. I will cover the points I disagree with.
I disagree that the electric consumption is a real problem. The author notes that power demand for bitcoin mining increases with bitcoin’s price, because the block reward is worth more. Well, every few years the block reward is cut in half (“the halvening”), and mining activity subsequently decreases (as does power consumption). Eventually new BTC emissions will cease, and miners will only be rewarded with transaction fees. Mining activity will certainly scale to compensate.
Low transaction throughput is a valid complaint, but does not take the lightning network into account. Lightning transactions are fast, cheap, and work today. More and more lightning nodes are being deployed. There is a tradeoff between decentralization/security and transaction throughput. The two-layer solution is actually better than scaling Bitcoin directly, because we get fast transcations without compromising decentralization.
Private key theft is a concern, but I think that’s a stronger indictment of our current security practices than it is of cryptocurrencies. We need trustable devices capable of securely storing private keys.
Regarding bitcoin’s value, the author seems to contradict themselves. They assert “most sensible recipients of a Bitcoin payment immediately convert their payment into dollars,” but they also say “The only rational behavior for someone holding a deflationary currency is to never actually spend it.” So which is it, should you hold bitcoin or dollars? I disagree with their assertion anyway. Stocks appreciate over time, but I will still sell stocks when I want to make a large purchase. It makes sense to cash out when you want to purchase something.