I know I'm not the first to admit that as great as Bitcoin is, it still has it's share of problems. I also believe that we should actively discuss these problems where appropriate since otherwise the protocol will have problems improving and maturing, and I think many people would agree with this sentiment. Well, recently I came across this article from MarketWatch which literally says Bitcoin is trash while providing very little in terms of meaningful discourse. Now while it would be easy to just say the article is dumb and move on, I thought I would take some time to address some of the criticisms it brings up, just this once.
So the article starts off like this:
If you’ve ever wondered what “cryptocurrencies” such as bitcoin, litecoin and ethereum are for, ask one of their legion of techie-libertarian fans.
And it’s dollars to dogecoins (yet another one) that the conversation will go something like this:You: So what’s the purpose of bitcoin?
Fan: The technology is absolutely amazing!
You: Yes, but what’s it for?
Fan: Really, the “blockchain” technology is a total masterpiece, way ahead of its time!
You: Yes, yes, I understand that. But what is it actually for?
Fan: You don’t understand! It’s a completely decentralized money system! Totally revolutionary!
You: Honestly, does it have a purpose? Any purpose at all?
Fan: It’s the wave of the future!
And on it will go.
Well that was quick. We're not even out of the introduction and already it's a mix of straw man and ad hominem. It probably goes without saying but I'll say it anyway: if you want to make a legitimate case against Bitcoin or any crypto for that matter, don't start out your argument like this. It's almost an instant credibility killer when you immediately attack the people using it (or in this case the stereotypes you believe are using it) - the only people who will believe you are those who are already in your camp or people who don't know any better anyway. Sure, there are people who think this way and that's just a fact of life, but to immediately claim everyone who likes Bitcoin is like this? If I'm someone who already owns Bitcoin, I'd honestly stop listening to you right here.
But for the sake of argument, let's continue:
Cryptocurrencies, or cybercurrencies, which have been in a massive financial mania until their sudden selloff this week, have two actual applications: online gambling and money laundering.
Oh boy. So first, it's currently debatable whether Bitcoin is actually a financial mania or not and there are legitimate arguments to be made for either side. It's entirely possible we're in a bubble right now, but given the extreme volatility right now that's a little hard to say for sure. Second, a selloff like we experienced this week implies very little about the long term viability of an asset - it just means that right now a lot of holders have decided they value it less and want to sell it off, and there are some valid reasons for that at least in the short term. Third, online gambling and money laundering? Really? While I don't doubt that those things happen, at the same time those aren't the only utilities Bitcoin and other cryptos have. Did you know you can shop online with Bitcoin? Did you know you can send transactions to anyone in the world through it far faster than what banks can accomplish right now? Are you aware that fiat, as stable as it is, has it's share of problems too and that there might be other reasons people are putting money into it that aren't just hype?
Online currencies are hardly a “store of value” when they have fallen about 30% in a week.
Are they really protections against the ravages of “inflation” and “monetary debasement” imposed by wicked governments? If so, how come people who keep their money in bitcoin and ethereum and the like have experienced Weimar Republic levels of consumer-price inflation just this week?
I'll agree that Bitcoin is hardly a great store of value, especially in the short term. But you have to be seriously daft to be comparing a drop in Bitcoin price to the hyperinflation in 1921 Germany. Those are two entirely different events with very different causes.
You notice, incidentally, that these bitcoiners continue to measure the market price of their beloved new currencies in terms of, er, old-fashioned U.S. dollars.
I'll give the article this one. Bitcoin is really an investment right now, and it has some obstacles to overcome if it ever wants to be a globally-recognized currency (I covered my issue with it being deflationary in my previous post). Because of that, right now we tend to view our holdings in Bitcoin as a measurement of the price - aka how much can I exchange it for USD or another currency I want to use? Yeah that comparison exists, but it's not without merit.
Cybercurrencies may make online purchasing and international money transfers marginally more efficient in theory, if hardly in practice. Would you risk moving your money from dollars into bitcoins just to save a few percentage points in transaction fees? You’ve seen that wiped out many times over this week just in price fluctuations.
Yeah why don't you get back to me when bank transfers actually become more efficient. Granted the Bitcoin network is slow right now so I'll give you that, but even then it's still generally faster.
Fast-growing rival ethereum was worth bupkis at the start of the year. Today it’s valued at $31 billion, or almost 10 times as much as the company ESRT, +0.02% that owns the Empire State Building.
Preposterous? You make the call.
This is just a straight-up bad comparison. Ethereum and ESRT are very different entities, and to compare them is comparing apples and oranges. Sure there's some overlap, but that doesn't mean fundamentally they should have the same kind of valuation.
I'm not trying to say that crypto is perfect and that any opinion against it must be wrong. I think it's good to talk about about what Bitcoin solves and the problems it faces especially with growing popularity. But this article is not that - it's not a good criticism of any crypto, and it fails to understand even basic information around the actual crypto space. If you're going to criticize, at least try to understand it first.
trying to understand
I guess the person critisising Bitcoin this way is still stuck in the denial phase, while the rest of the world is already entering the bargaining phase.