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Bitcoin: Some Contrarians Dare to Question BlockChain
A couple of weeks back I posted the article “Bitcoin: The Economics are Unsustainable.” Maybe now that a single Bitcoin trades in the range of $15-20,000 that argument holds less water. But by all measures, Bitcoin still seems like an incredible speculative bubble.
About one year ago, bitcoin was dominated by Chinese investors, accounting for as much as 80 percent of all transactions, but since the Chinese government’s ban on cryptocurrencies, legal trading from within China has dropped to almost nothing. The WSJ reports that the fever has moved to other Asian countries, from example, like South Korea, that are fueling the boom.
Kai Stinchcombe recently posted a fascinating contrarian opinion that questions the utility of cryptocurrencies like Bitcoin and the idea of BlockChain in general. He compares the inefficiencies of using Bitcoin as a payment system to credit card transactions like from Visa or MasterCard. Visa typically processed 60,000 transactions per second compared to 7 for Bitcoin (and Bitcoin uses up 35 times the amount of energy that Visa does). Each Bitcoin transaction actually takes about 8 minutes to process and costs about four cents to process.
Stinchcombe points out that an attractive feature of Bitcoin is its lack of control by government. He writes “The government-backed banking system provides FDIC guarantees, reversibility of ACH, identity verification, audit standards, and an investigation system when things go wrong. Bitcoin, by design, has none of these things.” Be careful, for example, not to leave any Bitcoin information in emails which can be easily hacked — with Bitcoin you would have no recourse after the theft of that money.
The article then goes on to cite failed examples and holes in the ideas of applying BlockChainto banking, smart contracts, distributed storage, stock trading, and authenticity verification. It will be interesting to see if Bitcoin will continue to spiral upwards or fall back to earth.
Bitcoin dropped to ~9000$ now, but i thin that the value will only grow higher.