Why Bitcoin Has No Future
Any "currency" not tied directly to either some unit of energy or time-work unit or some basis of exchange that is universally in demand is and always will be a bankers scheme/Ponzi scheme (same thing if you know the history). In this post, we'll take a closer look at this phenomenal new asset, some of its limitations and why it has no future beyond a temporary gambling "stake".
Unfortunately, bitcoin is an asset bubble similar to tulip bulbs, beanie babies, etc. These are all things that people have bought in the past, and driven to completely irrational prices, not because they did anything useful or produced any money and value to society, but solely because they thought they would be able to sell them to someone else for more in the future. A recent study reveals that about 95 percent of bitcoin spot trading is faked by unregulated exchanges. In order for Bitcoin to be a real currency, it needs several things:
a) easy and frictionless trading between people
b) to be widely accepted as legal tender for all debts, public and private
c) a stable value that does not fluctuate (otherwise it’s impossible to set prices)
Bitcoin has none of these things, and even safely storing it is difficult (see Mt. Gox, Bitfinex, and the various wallets and exchanges that have been hacked). The second point is also critical: Bitcoin is only valuable if it truly becomes a critical world currency. In other words, if you truly need it to buy stuff, and thus you need to buy coins from some other person in order to conduct important bits of world commerce that you can’t do any other way. Right now, the only people driving up the price are other speculators. The bitcoin price isn’t rising because people are buying the coins to conduct real business. It’s rising because people are buying it up, hoping someone else will buy it at an even higher price later. It’s only valuable when you cash it out to a real currency again, like the US dollar, and use it to buy something useful like a nice house or a business. When the supply of foolish speculators dries up, the value evaporates – often very quickly.
What exactly is Bitcoin?
Bitcoin is a cryptocurrency which isn’t managed by a bank or agency but in which transactions are recorded in the blockchain that is public and contains records of each and every transaction that takes place. The cryptocurrency is traded by individuals with cryptographic keys that act as wallets.
The creator of Bitcoin is Craig Wright, an Australian entrepreneur/computer scientist who had been producing software for online casinos and other gambling businesses for years when he was writing computer code that later helped to develop bitcoin. Early bitcoin code actully contained unimplemented functions related to poker. He worked on Bitcoin with an American cybersecurity consultant named David Kleiman, and by 2011 the pair had amassed 1.1 million bitcoins, worth more than $2 billion at today's prices. In 2015, associates of Wright began setting up companies making bitcoin and blockchain patent applications. Wright and his associates then lodged more than 70 patent applications in Britain and have plans to file many more. However, the Chinese are cracking down on Bitcoin and his scheme is playing out.
Absurd Energy Usage
Energy is the limiting factor associated with any new technology. If you push energy in one way or another, you usually have to control the push in that direction and that takes energy. To keep a system clean or to prevent decay or to repair the damage done by constant variations, etc etc takes energy. The result is the same, energy is the limiting factor... If we go to the next level, something like Dyson sphere level of energy control, the capabilities within reach are beyond most people's imaginations.
Bitcoin mining uses an exorbitant amount of power: somewhere between an estimated 30 terrawatt hours alone in 2017 alone. That’s as much electricity as it takes to power the entire nation of Ireland in one year. China is going down because their energy demands are so high that they will be paying the USA for oil and gas for the next few decades, which means the USA keeps their top dog status until oil runs out in twenty to thirty years. Large populations have a propensity to demand the energy they can't live without, so I guess that isn't too much speculation.
Anyone who has ever tried to use a locally stored wallet for cryptocurrency discovered with amazement and dismay that he or she could not make or receive payments until the entire download and verification process was complete — a few days if you were lucky. The Bitcoin network is capable of processing a maximum of seven transactions per second — for the millions of users worldwide.
Aside from that, Bitcoin-blockchain transactions are recorded only once every 10 minutes. To increase payments security, it is standard practice to wait 50 minutes more after each new record appears because the records regularly roll back. Now imagine trying to buy a snack using bitcoins. It’s no big deal to stand in line for an hour at the store, right?
You may ask: If it’s all the same thing, perhaps we shouldn’t store it on every network node? Sure, it would be more efficient. But, first of all, then it wouldn’t be a peer-to-peer blockchain but rather a traditional client–server architecture. Second, clients would then have to trust servers. Remember, “not trusting anyone” is one of the foundations of blockchain.
If you consider the entire world, that sounds ludicrous even now, when Bitcoin is used by just one in every thousand people on the planet. And given the transaction-processing speed, significantly increasing the number of active users simply isn’t possible. For comparison, Visa processes thousands of transactions per second and, if required, can easily increase its bandwidth. After all, classic banking technologies are scalable.
Lightning Network is a relatively nascent technology and is still under development that is suppose to solve this problem. As of this writing, the interconnection charges are set to zero because there are very few lightning nodes within the system. Just like bitcoin started out being very cheap. In the future, they are expected to increase. Even if Lightning Network increases transaction speed, there’s still a question of how widely it will be used, Bitcoin’s relatively greater price volatility means people are unlikely to hold their rent money in bitcoin. Lightning networks are also believed to be vulnerable to hacks and thefts because they are required to be online at all times. As such, cold storage of coins is not possible. Overall, you can't spend bitcoin like real money and governments will shut it down before it gets too big.
Bitcoin Controlled by tech cartels
Bitcoin is controlled by powerful tech cartels who work together (like central banks) to somewhat stabilize the price to keep gullible "investors" rolling in. Sometimes they buy their own product when the price drops too much and sell when it stabilizes. This keeps the scam going. Actually, all “independent” miners are also merged into pools (technically, they’re cartels as well). They have to merge on the assumption that it’s better to have a small but stable income than a huge payoff maybe every thousand years (and even that isn’t guaranteed if you on your own).
You could be financially destroyed at any time
If someone controls more than half of the computing power currently being used for mining, then that person can surreptitiously write an alternative financial history. That version then becomes reality. Thus, it becomes possible to spend the same money more than once. Traditional payment systems are immune to such an attack.
It may seem that if a blockchain is stored on each network node, then special services or authorities can’t shut down Bitcoin on a whim, inasmuch as there is no centralized server or something similar — they have no one to go to if they want to shut it all down. That is just an illusion, however.
As it turns out, Bitcoin has become a prisoner of its own ideology. “Excessive” miners cannot stop mining; that would dramatically increase the probability of a single person controlling more than half of the remaining computing power.
Just holding bitcoin is riskier than holding the equivalent dollar value at any time, not just on currency risk. Every single exchange is a zero-day hack away from losing all your money and smart wallet, etc, etc. No deposit insurance or whatever.
Governments will not allow bitcoin to replace their currency
The reason we have a currency is the same reason we have a government – to create, protect, and develop a society within our national borders. Countries desire to develop and improve their quality of life and the currency is their primary tool to do so. The U.S. doesn’t actually “borrow” dollars from China (or anyone else). Countries save the currencies of nations that buy their goods. China saves dollars (because it sells more to the U.S. than the U.S) and then uses US dollars as collateral to make more money. Currency-issuing nations can’t “borrow” the currency they, alone, create. What we call the “National Debt” is not a debt in any normal sense; government bonds are there for savers, not as a form of government borrowing.
If Argentina borrows U.S. dollars, it has a real debt since it doesn’t issue U.S. dollars. But if China saves dollars gained from trade in U.S. Treasury bonds, what does the U.S. really owe China that it can’t “pay” using a computer? No amount of prior government deficits or future government promises to retirees or medical patients can prevent the U.S. government from being able to make every single payment that comes due in U.S. dollars. A nation that issues its own currency can never go bankrupt or be unable to pay its bills, as long as those bills are due in the money they create. That includes promises to bond holders to pay interest, promises to retirees to pay them a decent income in retirement, or promises to veterans or the general public to pay for their medical care. The availability of the real resources that can be obtained with the national currency is where limits lie.
Lets look at the Chinese again. The Chinese renminbi fell to 6.9342 to the U.S. dollar a few months ago, a fall of 8.77% this year alone. With U.S. tariffs at 10% on $200 billion in Chinese imports, the falling currency almost wipes out the effect of the price increase on Chinese exporters. As the renminbi gets close to the psychologically important 7.0 to the U.S. dollar mark, the question is whether or not Chinese authorities will allow the currency to depreciate that far. While such a decline helps exporters, it could trigger currency outflows from China (bitcoin) as businesses seek to stabilize their assets. But foreign currency analysts at Deutsche Bank said that concern over outflows had diminished. As the trade war escalates, the Chinese central bank can either sell down foreign exchange reserves or raise interest rates or both, but that could have serious economic consequences at home.
Bitcoin is just a bunch of people gambling with the complementary forces of Human herd behavior, greed, fear of missing out, and a lack of understanding of past financial bubbles amplifying it. Gambling is the wagering of money or something of value (referred to as "the stakes") on an event with an uncertain outcome, with the primary intent of winning money or material goods. Gambling thus requires three elements to be present: consideration (an amount wagered), risk (chance), and a prize. The outcome of the wager is often immediate, such as a single roll of dice, a spin of a roulette wheel, or a horse crossing the finish line, but longer time frames are also common, allowing wagers on the outcome of a future sports contest or even an entire sports season.
That's all you need to know about bitcoin.
Bitcoin is now just a game of who gets left holding the hot potato. Countries are not going to give up their currency for bitcoin. If anything, countries will produce their own coins and we'll just have a repeat of what we currently have. When you make a bitcoin purchase, you are speculating, which is not a useful activity. You’re playing a psychological, win-lose battle against other humans with money as the only objective. Even if you win some money through dumb luck, you have lost some time and life energy, which means you have lost.
Investing means buying an asset that actually creates products and services and cashflow for an extended period of time. Like a piece of a profitable business or a rentable piece of real estate. An investment is something that has intrinsic value – that is, it would be worth owning from a financial perspective, even if you could never sell it.
These days, stocks are regulated by the SEC, precisely because in the olden days, there were many, many stocks issued that were much like Bitcoin. Marketed to unsophisticated investors as a get-rich-quick scheme. The very definition of an unsophisticated investor is “Being more willing to buy something, the more its price goes up.”