Cryptocurrency is going to change the world. Just kidding, cryptocurrency is a shitshow with more obstacles to overcome than a Navy SEAL on his first day of training.
I thought I’d write this up because of something I just read. A piece mentioned Charlie Munger and Charlie Munger mentioned that in order to have an opinion you ought to be able to state the opposing side’s view as well as your own. Well I think Charlie is a smart guy so let’s give it a go.
My opinion, crypto is going to change the world.
Opposing opinion, it’s not.
1 – Crypto is insanely unstable
If you bought some Bitcoin at the all time high in 2017 then your investment is worth just 20% of what it once was. We can go even more extreme, say you’re the poor fool who bought into Zcash at the top. If you bought $1 of it, you now have $0.02 and prices could go even lower. Who could blame someone for not parking their money in crypto?
2 – Crypto is insanely unstable Pt. 2
The flipside is the hodlers who believe that crypto is going to be worth more in the future. That’s great, except it means they’re not actually using the currency. People tend to not spend things which they believe will be worth more later. So we have a bunch of people hoarding this stuff and not using it. Where is the value in that?
3 – Crypto is hard to use
On a scale of opening a pickle jar to wrestling a polar bear, figuring out how to use crypto without losing it is somewhere around programming a VCR, if they still existed. Can you name someone who you would never trust to program a VCR? I can. A couple even. As crypto exists now it’s cumbersome, tough to understand and very easy to lose if you don’t know what you’re doing. And once it’s lost it stays lost. And once a person loses some they’re probably going to also lose a lot of enthusiasm for ever getting more.
4 – Transactions can be taxed
Some countries are better than others but as it stands now crypto transactions are taxed in a lot of places. So if you actually want to use Bitcoin to, you know, buy something… Then you have to pay a tax on that transaction which is obviously completely fucking absurd and a heavy discouragement on its use. Of course plenty of people ignore the taxes and figure the IRS won’t come after them for a $50 purchase and they’re probably right. But there are still a lot of people who will never begin to use something if they have to break a law, no matter how minor.
5 – It’s illegal / grey area in a lot of places
Bitcoin is, at the moment, illegal in India and Egypt and other countries that I don’t know about. In other places there is no clear legislation on it. Thankfully it seems to be fairly well accepted in most Western countries but is that always going to be the case? What about coins like Monero? It seems incredibly unlikely that something that allows completely anonymous transactions, and is possibly a viable tax haven, is going to be allowed to exist. Who would want to buy an asset which may be declared illegal in a year or two?
6 – It doesn’t work very well
If a person has only heard of one cryptocurrency then they’ve heard of Bitcoin. What’s so unfortunate about that is that technologically Bitcoin is a freaking Model T. It’s slow it’s expensive and when a lot of people use it the system breaks down. We have crypto projects which are Lamborghinis and Mercedes but people have not heard of them and even if they have they might not understand them. Or, let’s say you have heard of something great like Nano and you’ve figured out how to use the wallet, which is very intuitive and a great example of how to do crypto right. That’s fantastic but you can’t actually spend it anywhere! Oh yeah, and if you bought it at the top it’s lost 97% of its value as of today.
7 – It doesn’t solve enough hair on fire problems
You could argue this all day, and I’d love to. But I’m writing it so I get to say whatever I want and my opinion is that the largest hair on fire problem that crypto is solving / will solve on an infinitely larger scale in the future, is cross border remittance. What takes days or weeks now and costs an exorbitant amount of money can be done with crypto instantly and for free. That’s fantastic and in the not so distant future it’s going to completely disrupt a multi-billion dollar industry.
However, apart from that, I find it hard to see where there is a massive pressing demand for something that crypto currently offers. Smart contracts are good but are they good enough to change the world, at present? It doesn’t look like it. Decentralized exchanges will be huge but they’re not huge yet. Security Token Offering may very well be the largest lasting legacy of crypto but again, they are in their infancy. In terms of things that exist right here and right now, it can be tough to find a working project with massive demand especially for the average citizen of a country like the USA or Germany or the UK.
8 – It’s unregulated
The crypto community largely considers this a plus, and it is cool to work in the wild west of technology. However, it’s not going to work for worldwide adoption. Businesses are not going to devote millions or billions of dollars to blockchain projects if there is some chance that they will be regulated in a weird way or even declared illegal in the future. For better or worse we need consistent regulation so that people/companies know what they’re working with, know what to expect and know that all their projects won’t be fucked up by some new crazy law in nine months.
9 – It uses a bunch of electricity
Honestly I just threw this in because a list with nine things sounds better than a list with eight things. But I suppose it is a valid point that Bitcoin mining uses more energy than the country of Denmark. However, I don’t think this is as insurmountable a problem as something like the price volatility. A lot of newer coins are Proof of Stake or like NEO they use some form of DBFT consensus algorithm which uses so little electricity it’s negligible. Nonetheless, the current energy demands are troublesome.
So that’s that, nine reasons why crypto is a fantastic fuckup that no sane person would touch with a ten-thousand foot pole. Unless you really believed that this stuff is going to change the future and alter the way we live our lives.
Which is something I happen to believe.
Because even though it’s riddled with problems, there are also some incredibly exciting things happening. The more I learn the more I continue to be amazed and hopefully in ten years we’ll look back and laugh at the pessimism.