Brutal truth about Bitcoin

pingofive.com
6 min read
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Are cryptocurrencies the wave of the future and should you be using and investing in them? And do the massive swings in their prices—nearly $1 trillion was wiped off their total value in May—portend trouble for the financial system? Bitcoin was created (by a person...
Are cryptocurrencies the wave of the future and should you be using and investing in them? And do the massive swings in their prices—nearly $1 trillion was wiped off their total value in May—portend trouble for the financial system?

Bitcoin was created (by a person or group that remains unidentified to this day) as a way to conduct transactions without the intervention of a trusted third party, such as a central bank or financial institution. Its emergence amid the global financial crisis, which shook trust in banks and even governments, was perfectly timed. Bitcoin enabled transactions using only digital identities, granting users some degree of anonymity. This made Bitcoin the preferred currency for illicit activities, including recent ransomware attacks. It powered the shadowy darknet of illegal online commerce much like PayPal helped the rise of eBay by making payments easier.

As it grew in popularity, Bitcoin became cumbersome, slow, and expensive to use. It takes about 10 minutes to validate most transactions using the cryptocurrency and the transaction fee has been at a median of about $20 this year. Bitcoin's unstable value has also made it an unviable medium of exchange. It is as though your $10 bill could buy you a beer on one day and a bottle of fine wine on another.

Moreover, it has become clear that Bitcoin does not offer true anonymity. The government's success in tracking and retrieving part of the Bitcoin ransom paid to the hacking collective DarkSide in the Colonial Pipeline ransomware attack has heightened doubts about the security and nontraceability of Bitcoin transactions.

While Bitcoin has failed in its stated objectives, it has become a speculative investment. This is puzzling. It has no intrinsic value and is not backed by anything. Bitcoin devotees will tell you that, like gold, its value comes from its scarcity—Bitcoin's computer algorithm mandates a fixed cap of 21 million digital coins (nearly 19 million have been created so far).…
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