Cryptocurrency is a digital currency that operates on a decentralized network of computers, using cryptography to secure transactions and control the creation of new units. It is often touted as a revolutionary innovation that will transform the world of finance, commerce, and society. But is it really? Or is it just a clever scam that exploits the ignorance and greed of its supporters?
In this article, I will argue that cryptocurrency is a hoax, a bubble, and a threat to the stability and security of the global economy. I will present four main criticisms of cryptocurrency, based on its price volatility, high energy consumption, use in criminal activities, and lack of intrinsic value.
One of the most obvious drawbacks of cryptocurrency is its extreme price volatility. The value of a cryptocurrency can fluctuate wildly in a matter of hours, days, or weeks, depending on market sentiment, supply and demand, news events, and speculation. For example, Bitcoin, the most popular and oldest cryptocurrency, reached an all-time high of over $60,000 in March 2021, only to drop by more than 50% in May 20211. Such swings make cryptocurrency an unreliable store of value and a risky medium of exchange.
Price volatility also exposes cryptocurrency investors to the risk of losing their money to market manipulation, hacking, fraud, and theft. There have been numerous cases of hackers stealing millions of dollars worth of cryptocurrencies from exchanges, wallets, and users2. There have also been instances of fraudsters creating fake cryptocurrencies or ICOs (initial coin offerings) to lure unsuspecting investors into giving them money3. Moreover, there is no legal or regulatory protection for cryptocurrency investors in case they lose their money due to these or other reasons.
High Energy Consumption
Another major criticism of cryptocurrency is its high energy consumption for mining activities. Mining is the process by which new units of cryptocurrency are created and verified by solving complex mathematical problems using specialized hardware and software. This process requires a lot of computing power and electricity, which has a negative impact on the environment.
According to some estimates, the annual energy consumption of Bitcoin alone is comparable to that of some countries, such as Argentina or Norway4. This means that Bitcoin produces a large amount of carbon emissions, contributing to global warming and climate change. Furthermore, the increasing difficulty and competition in mining makes it more expensive and less profitable over time, creating a waste of resources and an incentive for miners to use cheap and dirty energy sources.
Use in Criminal Activities
A third criticism of cryptocurrency is its use in criminal activities. Because cryptocurrency transactions are anonymous, irreversible, and hard to trace, they are ideal for facilitating illegal activities such as money laundering, tax evasion, terrorism financing, drug trafficking, ransomware attacks, and cybercrime5. For example, in 2020, hackers demanded $4.4 million worth of Bitcoin from Colonial Pipeline, a major US fuel supplier, after shutting down its operations with a ransomware attack. In 2019, Facebook announced its plan to launch Libra (now Diem), a global cryptocurrency backed by a basket of fiat currencies and assets. However, the project faced strong opposition from regulators and lawmakers around the world who feared that it would undermine their monetary sovereignty and enable illicit activities.
Lack of Intrinsic Value
A fourth criticism of cryptocurrency is its lack of intrinsic value. Unlike fiat currencies that are backed by governments and central banks or commodities that have physical uses or scarcity value, cryptocurrencies have no inherent value or utility. They are only worth what people are willing to pay for them based on their beliefs and expectations. However, these beliefs and expectations are often irrational and unfounded.
Cryptocurrency supporters claim that cryptocurrencies have value because they are scarce, divisible, portable, durable, fungible, and verifiable. However, these characteristics are not sufficient to create value. They are merely technical features that enable cryptocurrencies to function as currencies. But without any underlying economic or social value or demand, cryptocurrencies are essentially worthless.
Cryptocurrency supporters also argue that cryptocurrencies have value because they are decentralized and independent from governments and central banks. However, this argument is flawed for two reasons. First, decentralization does not guarantee security or efficiency. In fact, it creates vulnerabilities and inefficiencies in the system such as network congestion, transaction delays, forks (splits), and consensus failures. Second, independence does not imply superiority or stability. In fact, it exposes cryptocurrencies to the risk of hyperinflation or deflation due to uncontrolled supply or demand shocks.
In conclusion, cryptocurrency is a hoax that deceives its supporters with false promises and illusions. It is not a revolutionary innovation that will transform the world of finance, commerce, and society. It is a dangerous delusion that will harm the environment, facilitate criminal activities, and destabilize the global economy. Therefore, I urge you to avoid investing in or using cryptocurrencies and to stick to the traditional and reliable forms of money.