Another day and another Bitcoin boost, this one so irritating I've been inspired to negate virtually every line... At this stage, surely the only reason why anyone holding or mining Bitcoin would lure new buyers is to get their own Bitcoins out. Rational justifications don't bear scrutiny, so the boosters' pleas tend to be couched in semi-religious rants that only require you to believe - as an act of faith. But try watching the WeWork documentary without thinking about FTX... That doesn't mean I'm down on distributed ledger technology in general. DLT has its use-cases, but its deployment should be approached like any other tech project, not a cult.
Debunking another Bitcoin sermon
Bitcoin is not "money". At best it might be a means of settling a trade between two parties (A and B), so long as each of them has an absolutely certain way to exchange their Bitcoin immediately with another party (C and D) for the agreed value of their trade in fiat currency. That might be possible in certain institutional scenarios - although even institutions got caught up in FTX - but very risky as a retail payment method, mainly because the price is so volatile.
Bitcoin does not remove counter-party risk. Ask Celsius or FTX customers. And it's futile to claim it removes counter-party risk between A and B in the above example, when that risk remains between A/C and B/D - not to mention the wider cryptoverse, as still being illustrated by the collapse of FTX.
Bitcoin transactions do happen faster than many types of retail and other payment methods which are settled over one or more days, since each block of transactions is completed in 10 minutes. But speed itself does not make Bitcoin appropriate as a retail payment method (as opposed to a potential settlement mechanism, as mentioned above).
Bitcoin does not have an absolutely "incorruptible history", which could only be judged in hindsight anyway. Even if it initially seemed unlikely that any one miner or group of miners could create a new branch or 'fork', rising energy costs and periodic reductions in rewards have been driving concentration among miners (explained further below).
While the Bitcoin protocol itself may be 'trustless', that's actually a shortcoming or 'externality' that others have struggled - and consistently failed - to solve, at greater and greater cost as the ecosystem has grown. Ironically, therefore, it is kind of true to suggest that Bitcoin "is an impenetrable fortress of validation" (yet) "trusted third parties are security holes". The point is that Bitcoin does not exist in a vacuum. [For some reason I'm reminded of the Lewis Grizzard book: "Don't bend over in the garden, granny, you know them taters got eyes."]
Again, to blame "centralised exchanges and custodians" as "destroying everything that makes Satoshi's invention great in the first place" is effectively conceding that Bitcoin is worthless in any 'currency' other than Bitcoin itself. In other words, for all other practical purposes Bitcoin is worthless without a way of exchanging or holding it; so if exchanges and custodians 'destroy everything great about Bitcoin' then it must be worthless.
It's obvious and goes without saying that Bitcoin "is not a company. It can't go bankrupt. It has no CEO that can be influenced, arrested, or corrupted." This is just gaslighting. The same can be said of the USD. The fact is that the Bitcoin protocol must have a way of interoperating with the rest of the world and that necessarily involves contact with third parties and other forms of value, at which point Bitcoin's supposedly utopian benefits suddenly become externalities that must be addressed before Bitcoin can be useful. Success in negotiating and regulating that real world interface explains the relative strength, lack of volatility and broad acceptance of the USD and other major fiat currencies, compared to Bitcoin.
Similarly, it's a bit bizarre to say that "Bitcoin's monetary policy is set in time, not by decree. It can't be changed. It can't be argued with. It is unrelated to demand, unrelated to energy usage, and independent from politics." Miners are rewarded in Bitcoin, so it becomes critical to know the cost of mining each Bitcoin, as it would not be worth mining them if the costs could not at least be covered. Currently, the cost of mining a Bitcoin is considered to average out at $17,000 depending on where the miner buys the vast amount of energy required to mine each 'block' (itself a source of significant political controversy). At time of writing the USD price of Bitcoin was $17,220.25 (and, oh look, as at mid-October there were 276,000 Bitcoin mining rigs that had never been installed). The Bitcoin protocol dictates that mining rewards halve periodically and, on current forecasts, in 2024. Yet the maximum 21 million Bitcoins isn't due to be mined until 2140... Given that the Bitcoin protocol only launched in 2009 that's an awful lot of time and opportunity for it to grind to a halt.
But, sure, if Bitcoiners can stoke demand, the USD price of Bitcoin will rise again and profits can be extracted. Or energy costs might fall, efficiencies improve and/or mining might decline to constrain supply in the face of constant demand. Such factors would explain why miners have borrowed during past Bitcoin market troughs. But that's also left miners and their lenders with $2.5bn in loans that are exposed to wider market contagion following the collapse of FTX...
In other words, the purity of the Bitcoin protocol is actually vulnerable to: the misconduct of exchanges, custodians and decentralised finance (DeFi) providers (and resulting distrust), rising energy costs, limits on computing efficiency and over-borrowing by miners.
Now comes the crescendo of the sermon, which involves repeating a few truths from above...
We've already seen that Bitcoin is CERTAINLY NOT "an answer to the moral failings of fiat money and our fiat monetary institutions". Indeed, I agree that "Crypto" as an industry "is a reincarnation of ... failing [fiat money] institutions, replacing the friendly faces of clean-shaven bankers with the shy smiles of unkempt teenagers."
The point is that Bitcoins are not divisible from the Crypto industry, any more than a 10 pound note is divisible from the wider fiat financial system. It doesn't matter whether "Bitcoin is honest, fair, and truthful" on its own, since it is not used or useful in splendid isolation.
Perhaps other implementations of DLT that do not purport to be any form of payment method (or e-money or security) may be divisible from the Crypto industry; but equally we should not be fooled into thinking that they do not have their own externalities and challenges in integrating with the 'real' world. Their implementation should also be approached like any other tech project rather than merely requiring a cult-like belief in their intrinsic benefits.
Bitcoin is as much a victim of the "game of liquidity and purchasing power" as any other commodity, and in some ways more so. Only the financially strong miners have survived, and to the extent that we have any idea who or where they really are, they appear to be based in the world's largest totalitarian regime:
Due to the cryptocurrency’s design focus on privacy, there is no indicator of how many new coins are created from which location – hence why the figures provided here look at PC processing power, and not Bitcoin themselves. In 2021, the world's top Bitcoin mining pools all came from China, with five pools being responsible for over half of the cryptocurrency's total hash.
The final tout is a promise of personal sovereignty, much favoured by Trumpsters and the Brexidiot Alt Right:
"If you don’t hold your own keys, you don’t hold bitcoin—but IOUs. If you don’t run your own node, you have no say in Bitcoin—you are beholden to someone else’s idea of Bitcoin. For bitcoin to be your money, you have to hold your own keys, and you have to verify with your own node."
Of course, anyone not holding their own keys or running their own node should be worried by this statement.
But even if you have the skill, time and resources to rush home and engage with the process of holding your own keys and operating your own node, we have already seen that this process will not magically deliver "deep stability and autonomy" or make you "a sovereign individual" anywhere outside the Bitcoin protocol itself. In fact, depending on the real world's view of your identity and circumstances it may mean you're excluded from the 'real' world altogether, like those caught up in the Hell that is FTX group or North Korean hackers.
So why would somebody write such an overblown puff piece tempting newbies to exchange their cold hard cash for Bitcoin?
Probably so that they and their Bitcoin buddies can cash theirs out.
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