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12 Sep 2019
Out of the box
Suggestion View - 153
My views about bitcoin and cyptocurrencies

I wish to share my views about bitcoin and cyptocurrencies. 

When I learned that bitcoin was built on the blockchain platform, I spent some time to learn about blockchain. I formed the opinion that it is an inefficient platform. I shall talk about it in a separate post.

I met an expert in the blockchain platform. I asked him about the cost of processing a transaction using blockchain. He quoted a high figure that is not economically feasible. In defense, he said that the cost to come down with improvements in the algorithm. I am not optimistic.

There is another issue with cryptocurrency. The proponents said that it allows the participants to transact anonymously, without any oversight by a third party, such as the government. 

I do not agree that this is an advantage. In my view, it is a disadvantage. 

Why do I say so? It is clear to me that the cryptocurrency has to be stored in a database that is managed by the database owner. 

In the past years, there were a few cases where the database had been hacked and the cryptocurrency (i.e. bitcoin) had been stolen. The technology did highlight that there was discrepancy and that the currency had been stolen.

What can be done about the theft? Who takes the responsibility?

If I am not mistaken, the database owner offered to get all the customers to share the loss from the theft proportionately. They are not able to take the full loss. 

In fact, I have a strong suspicion that the theft of the cryptocurrency is an inside job. The people who were supposed to manage the database know how to conduct the theft and leave the losses to be suffered by the customers.

So, cryptocurrency does not increase security. It still carries its risk of theft and loss. It only improves the transparency.

Many people were excited about bitcoin, which is the best known cryptocurrency, because it has increased in value significantly. This is not a real value; it is a speculative value. It is a bubble, like so many other bubbles that occurred in economic history.

Many participants have started to create other cryptocurrencies in the hope that they will be as popular as bitcoin. They are called ICO, or initial coin offering. These new coins have not taken off. There were too many coins that dilute the speculative interest.

There is no justification for cryptocurrency. If you search Google, you will read many articles about the case against cryptocurrencies. Some of these articles were written by well known economists.

Here is one of them. 
https://www.bbc.com/news/business-48852059

There may be a need for a currency to replace the US dollar as the medium for international trade. But the US will fight against it, as they do not want to lose the benefit that they now enjoy as the accepted reserve currency.

Here is my conclusion. There is no need and no place for cryptocurrencies. It will die a natural death.

Tan Kin Lian

Vote - do you agree with me that there is no need for cryptocurrency?
 


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