The Four Notorious Ideas About Bitcoin
In recent weeks, especially since its outbreak in November, the mainstream media have only eyes for bitcoin. There are countless so-called classic programs, such as that of Yves Calvi , devoting an always interesting debate on crypto-currencies … and especially on bitcoin, let’s face it.
The thing that we notice immediately is that the arguments of the ones and the others did not evolve long ago. The anti camp on their initial positions: it’s a bubble, it’s like the tulip crisis in 1637 , it’s worthless, it’s anonymous, it’s for terrorists, it’s an ecological disaster, etc. … The pros are trying to explain what bitcoin is, what it’s used for, why its value is real, that it has already suffered several bubbles, etc … In short, it is difficult to see clearly !
So I modestly looked at an attempt to disentangle the true from the false in these arguments. It is particularly to break the 4 notorious received ideas that abound for months or even years. One can add a fifth, although it has no clear answer.
Myth # 1: Bitcoin is anonymous
This incongruity is much less common on the internet than on television sets. Even though, Le Monde can explain to itself that bitcoin is anonymous but in fact no … However, I do not count the number of “financiers”, “investment experts” and other so-called connoisseurs of the medium to advance, without any doubt on their part that bitcoin is anonymous.
It’s time, once and for all, to break this stupidity. NO, bitcoin is not anonymous! He is a pseudonym . The Bitcoin blockchain, which you can download for free , is accessible to all. All transactions are listed there. For example, you might find that 684f5g67gf57 sent X BTC to ze7d6f45d64 on November 21st, 2016 at 12:42.
The difficulty is to know who is behind 684f5g67gf57 and ze7d6f45d64. For this, it is necessary to use experts in cryptography. And it is largely thanks to a detailed deciphering of these keys that the Silk Road site fell and that its founder is now in prison for life … Like what, the banknotes would have been more useful to the traffickers!
Myth # 2: Bitcoin is a currency
Here, I place myself on the dark side of anti-bitcoin? I had already expressed my doubts about this theme …
From a legal point of view, bitcoin could be considered as an electronic money. This is pursuant to Article L. 315-1 of the Monetary and Financial Code which defines the said electronic money. Except that the law of January 28, 2013, which introduced this article is in fact the transposition of a European directive of … 2009. It is unlikely that the European legislator got wind of bitcoin the same year it was created.
However, this definition has the advantage of being quite broad and it is not legally wrong to place the cryptocurrencies. The problem is elsewhere.
From a practical point of view, bitcoin is more of a financial asset or convenience than a currency. The reasons are multiple. First of all, its acute volatility is far too dangerous to make a currency in the same way as the euro. As a “classic” currency undergoes extreme volatility, it disappears, like the Zimbabwe dollar . Countries where bitcoin is becoming a highly appreciated means of payment … It seems impossible for bitcoin to surpass the euro or the US dollar because these currencies are indeed stable.
Second, the value of bitcoin is too high for everyday purchases. How about paying your coffee 0,001 BTC? This has no practical meaning.
Third, transaction fees for bitcoin have increased. Of course, they are much lower than bank charges for international transfers. But the bitcoin transaction fees are almost fixed. Thus, the fees will be identical to transfer 1 or 0.0001 BTC. Who will agree to pay his coffee 1 € + 3 € transaction fees? Not many people … and this is probably the reason why bitcoin is not accepted as a means of payment.
Bitcoin is therefore more of a financial asset, a commodity … like gold. I had talked about it several months ago .
Myth # 3: Bitcoin is not secure
Admittedly, this idea is less and less mentioned by mainstream media. Yet, the very serious Economic Alternatives has fallen into the trap in a very recent article … So let’s make simple why the bitcoin protocol is tamper-proof while their detention is not.
The bitcoin protocol, based on the blockchain of the same name, has never been in jeopardy since its creation . Its safety and security are well established. To hack it, it would require a higher power than all computers in the bitcoin network. At present, even Google does not have this power. The proven risk would be that a mining pool would hold 51% or more of the mining market and validate fraudulent transactions. The immediate consequence would be the loss of confidence in bitcoin because we would be very quickly made aware of the deception. And many would get rid of their bitcoins whose value would be reduced to nothing.
The possession of bitcoins is, in turn, more or less secure . The cases of theft of bitcoins exist and that of the French Mark Karpelès , former boss of MtGox, is undoubtedly the best known. Are the owned bitcoins safe then? To be simple, avoid leaving them on an exchange platform (Kraken, Coinbase …) whose risk of piracy is real. A mobile app like MyCelium remains a safe bet but not totally immune to a possible hacking of your phone. Absolute security lies in wallets such as those proposed by Ledger . There is no need to develop more on the subject in this article.
Myth # 4: Bitcoin is very polluting
We get into a much more sensitive subject, namely the electronic consumption of bitcoin. It would be unwise to deny that the mining activity consumes an astronomical amount of electricity. A transaction would require approximately 215 kiloWatt hours (KWh), or more than 24 terawatt hours (TWh !!) for all transactions over one year. As much as … Nigeria and its soon 200 million inhabitants!
The numbers make you dizzy and even cold in the back. Imagine the amount of coal or nuclear to mine bitcoins … except that it is not so simple.
I will not repeat what this very interesting article says on the subject. No, bitcoin is not an ecological chasm. Indeed, as Philippe Rodriguez and Laurent Leloup also explain in their excellent works on the blockchain, the Chinese mining farms work for some with solar energy. Yes, others still work on coal because it is not expensive but solar energy is becoming increasingly important. Another example is the Icelandic data center, which operates on geothermal energy.
So yes, it is essential to reduce electricity consumption by changing the validation systems. But do not think that bitcoin pollutes more than industry or intensive farming.
Bonus idea: bitcoin is a speculative bubble
Ah bitcoin, this beautiful bubble that will burst! We hear this throbbing song every day … Yet the answer is impossible to give.
First, is bitcoin a bubble? Objectively, yes … Today, new buyers are hoping to see the value of bitcoin increase … thanks to future buyers. And so on. The whole value of bitcoin is based only on supply and demand. Thus, to hope for a gain, it is essential that there are new buyers . One day, it seems certain that new buyers will be fewer. But when ? Nobody can say it … Bitcoin could then rise to 10,000, 15,000, 30,000, 50,000, 100,000 € … or suddenly drop suddenly. I am nevertheless optimistic for the end of 2017 and the first half of 2018. Bitcoin is still marginal, its popularity can only increase.
In addition, bitcoin has already suffered several bubbles! Or rather crashes. Indeed, its value has already increased from € 20 to € 10 in June 2011, from € 200 to € 80 in April 2013, from € 900 to € 200 over the whole of 2014, from € 3,000 to € 1,700 in July 2017 and even from 7500 to 4400 € last November (these figures are about, I have not checked the accuracy but I’m not far). And you know what ? The bitcoin will still wallow heavily … and go back up. These figures show that bitcoin is an amazing unit made of very highs and crashes, bubbles, runaway … you could say anything. And that’s what makes it so active yet so dangerous.
Paradoxically, the more detractors bitcoin has, the higher its value will remain. Indeed, the human always tends to go against the doxa majority … The day when the bankers will be delighted to propose investments in bitcoin, where the tele-compatible experts will be pro-bitcoin, it will probably enter the terminal phase.