Huh?
Just as confusing as the title I chose for this post are the statements I've been reading more and more on GetQuin recently on the subject of Bitcoin and crypto. I don't feel like constantly repeating every argument in umpteen comment columns. Hence this "small" post ( @InvestmentPapa I hope we're on the same page again 💖), which should clear up the most common misunderstandings about Bitcoin and crypto and which I'll just have to link to in future. I will add to the post if necessary. If you are also confused, let me know in the comments. If I deem you worthy, I will include your confusion in this post and untangle it.
But before I go into some specific statements in posts and comments on GetQuin, let's start with the basics, without really going into the technical implementation and functionality. You can look these up in my series of articles "Cryptocurrencies for stock market disciples" exclusively on GetQuin:
What are cryptocurrencies and what added value do they generate?
https://app.getquin.com/activity/buTJFYxcSD
Technology and security of cryptocurrencies
https://app.getquin.com/activity/QHAzXeXlSO
How to make money with cryptocurrencies
https://app.getquin.com/activity/ZgfENSuSRD
What is Bitcoin?
Bitcoin is a digital, decentralized and limited-quantity asset that functions entirely without central authority, is easily divisible and transferable, and offers complete transparency, predictability and tamper resistance.
Bitcoin is like money, except that ...
- ... no one can "print" additional Bitcoin
- ... no centralized entities such as banks are needed to send it around the world
- ... there is no trustworthy authority behind it to ensure that purchasing power is maintained
- ... scaling poses real, possibly unsolvable challenges for the Bitcoin network
Bitcoin is like gold, except that ...
- ... it can be transported and distributed much more easily
- ... its authenticity can also be confirmed by laypersons
- ... it has not enjoyed the trust of mankind for centuries
- ... it cannot be touched or processed
What are the benefits of Bitcoin?
The benefit of Bitcoin lies in a decentralized, tamper-proof and predictable network. People who believe in Bitcoin assume that it will be important for such a network to exist in the future. For example, to protect their assets or themselves from government intervention. Because they want to be independent of centralized institutions or hope for more automation, transparency and efficiency. Feel free to think (or let Google think for you) about other examples. The list is not exhaustive.
At the moment, there is little reason to worry in our western world that we could soon be dependent on such a network. In other countries, however, things are already looking different. Besides, nobody knows what the future holds. If you still don't see any added value in a decentralized, tamper-proof and predictable network after studying the topic in depth, Bitcoin is definitely not for you. Unless you switch to the side of the speculators.
What is the difference to "crypto"?
The term "crypto" is generally used to refer to altcoins, i.e. all cryptocurrencies other than Bitcoin. Bitcoin fans now attach great importance to the fact that Bitcoin is not a crypto. Why? Because Bitcoin focuses on (manipulation) security and decentralization without compromise. Altcoins tend to focus on other things, such as speed or additional functions like smart contracts. Decentralization and security are often sacrificed for this. That makes no sense. If I want a fast network with as many functions as possible, but which does not have to be decentralized and/or secure, I can have it operated directly by a company, a bank or a state. That's more efficient.
Bitcoin provides a decentralized, tamper-proof and predictable network. This gives it a raison d'être (for some). Altcoins do what any centralized institution could do, only much more inefficiently than a centralized solution. The raison d'être of altcoins can therefore certainly be called into question, or must at least be sought in areas other than Bitcoin. Of course, it cannot be ruled out that at some point a cryptocurrency will be created that is more decentralized and secure than Bitcoin. At the moment, however, Bitcoin differs from the other cryptocurrencies primarily in terms of its focus and distribution.
After these basics, let's move on to the statements and questions that I keep reading on GetQuin:
Example FTX: Who should you trust here anymore, please? The bubble burst long ago!
The bankruptcy of FTX, the collapse of Terra Luna or the hack of the Bitcoin exchange MTGox in 2014 are just a few examples of a long history of bankruptcies, bad luck and mishaps in the young crypto sector. However, they all have something in common: they disregarded the most important characteristics of Bitcoin.
FTX was central. Few people had full control over the deposits and what was done with them. It was easy to gamble them away, lose them or pull off a classic exit scam. Bitcoin was not attacked in the process. It is insane to leave a decentralized asset to a central, unregulated entity to manage.
MTGox was centralized and not secure. Few people were responsible for the security of the deposits. They failed. Either hackers were able to circumvent the company's security mechanisms and steal Bitcoin and/or it was an inside job. The Bitcoin was not attacked. It is insane to leave a decentralized asset to a central, unregulated entity to manage.
Terra Luna was developed by a centralized foundation. Mechanisms and functions were implemented whose security could not be guaranteed. These mechanisms were exploited, leading to its collapse. Bitcoin was not attacked in the process. Bitcoin does not dare to experiment. Its code is relatively simple and has been constantly tested for vulnerabilities for over 10 years without success.
It is not Bitcoin that is collapsing. It is the ecosystem that has grown around Bitcoin. An ecosystem full of scammers and gamblers who smell the quick buck. I think it should be clear to everyone that the growth of this ecosystem was anything but sustainable and is a gigantic bubble. The zombie companies/coins from the cryptospace, so to speak. It is a good thing that this bubble continues to burst in order to enable sustainable and serious growth. Even if there are a few pawns to regret. Without wild speculation, greed, laziness and unjustified trust in centralized, unregulated authorities, these could have been avoided.
Bitcoin will be the new global payment system of the future!
No! Bitcoin is completely unsuitable as a currency for a state, as a state has an effective means of influencing the economy with its currency. This possibility is taken away from the state with Bitcoin as an official currency. Furthermore, Bitcoin cannot be used to process a large number of transactions, as the network scales too poorly for this. Scaling solutions such as the Lightning Network still have to prove themselves. The only chance I see of Bitcoin becoming a global currency is a global revolution by the population. But even then, in my opinion, a return to the gold standard is more likely than the introduction of a new Bitcoin standard.
How can Bitcoin be a store of value if it is so volatile?
Bitcoin is not a store of value. Bitcoin can become a store of value. Currently, the Bitcoin price is primarily determined by gambling. There are also general uncertainties due to Bitcoin's still very young age and the resulting lack of historical data. At the moment, an investment in Bitcoin is a bet that the fair value of a Bitcoin is higher than the current value (or that you can sell at a good time). No one can say where this fair value lies. At 1 million euros? At 1,000 euros? At 2 euros? Only when the gamblers have largely disappeared and people are investing in Bitcoin based on its properties will we get an idea of what its real value is. And then, precisely because of its properties, it should also serve as a store of value.
All the Bitcoin fanatics really get on my nerves!
Me too! For the majority of people who own Bitcoin, the only benefit is to get rich quickly. This is probably also the reason for its bad reputation and high volatility. People who buy Bitcoin without sense and reason and just for speculation fuel the market and spread crazy slogans about Bitcoin or the FIAT system (you can also see this in some Bitcoin Maxis), which are quite rightly chalked up or torn to shreds by no-coiners.
There is no point in seriously discussing Bitcoin or crypto with such people. Don't take these slogans too seriously. There are often (not always) attempts to mask incompetence and cluelessness by being loud. However, please remain open to discussions and arguments with animals (and people) who are serious about the subject matter. Not everyone is like that!
The amount of bitcoins available can be increased!
Theoretically, it can. Bitcoin is open source, anyone can look at the code, change it and even remove the limit of 21 million. But just because the code of Bitcoin has been changed does not mean that there will be more than 21 million Bitcoin. The changes to the code must be accepted by the miners and node operators. This means that every change to the code requires the approval of three distributed parties: The adapted code must be accepted by the majority of developers and adopted by both the majority of miners and node operators. This is not easily possible due to the decentralized nature of Bitcoin. In addition, the players involved would be cutting themselves in two with such an action, as trust would be destroyed and Bitcoin would become useless. In such situations, the emergence of a new cryptocurrency that splits off from Bitcoin is much more likely.
The FIAT system will collapse!
Yes, it will. Just like every system before and after it has collapsed and will collapse. But that is not dramatic, as it will be replaced by a new system. That this new system will be Bitcoin, of all things, is nothing but wild speculation. Just like the question of when the system will collapse. Tonight? Next year? In 2,000 years? This makes it all the more important to invest your money and not keep it under your pillow so that such a crash does not mean financial ruin. Broadly diversified is king here. Anyone who puts all their eggs in one basket - be it Bitcoin, real estate, gold or a single share - is taking too high a risk.
Protection against inflation? Don't make me laugh!
That's right, Bitcoin does not currently protect against inflation because it is too volatile and its value is largely determined by speculators and gamblers. However, if Bitcoin manages to address a larger market and stabilize, it will serve as an inflation hedge and store of value due to its characteristics (which are not deflationary, by the way, the amount of available Bitcoins will grow every few minutes for the next 100 years). Similar to gold. However, whether Bitcoin will achieve this status and where its equivalent value in euros will then lie is nothing more than speculation.
Bitcoin makes no profit and pays no dividends!
That's right. But neither do gold and FIAT money. On the contrary, the amount of FIAT money available is constantly increasing and in much larger steps than is the case with Bitcoin. Many of you have probably already invested money in an unprofitable growth stock. Not only did it fail to make a profit and pay out a dividend, but it even lost money year after year - and perhaps grew anyway. You invested in the idea. You hoped that the company's product would be needed. Nothing else is an investment in Bitcoin.
Look at El Salvador! That's what they get for gambling with Bitcoin!
As already mentioned, Bitcoin is, in my view, completely unsuitable as a currency for a state. Bitcoin has other advantages, which I described at the beginning. This does not change just because a state adapts Bitcoin as a national currency without any rhyme or reason and the price plummets, also for the reasons already mentioned. Just as with FTX, MTGox, Terra Luna and all other debacles in the cryptospace, Bitcoin is not responsible for the wrong decisions of a central authority.
The crypto market must and will be regulated and then it will die!
Yes and no. In order to invest in Bitcoin or crypto as a company or private individual, a legal framework is needed for trading, storage and taxation. Bitcoin does not mean operating in a legal vacuum. In the long term, Bitcoin will benefit from regulation. This can prevent or at least reduce new cases like FTX in the future. Regulating Bitcoin / crypto does not mean that these decentralized networks will fall into state hands. Due to their decentralized nature, they cannot do so. Bitcoin is here to stay and will remain so as long as people see a benefit in it. A state can ban Bitcoin, but it cannot control it.
Bitcoin is harmful to the environment and should be banned!
Yes, the operation of the Bitcoin network requires electricity. Yes, the production of the hardware on which the network runs requires raw materials that cannot be used for anything else. But the question is not whether Bitcoin is harmful to the environment or not (it is, just like pretty much everything else we do), but whether the benefits Bitcoin provides outweigh the harm it causes. And that's a very individual question. People who see no added value in a decentralized, predictable and tamper-proof network will clearly answer "no" to this question. But couldn't the environmental damage caused by the mining and processing of gold be significantly reduced if gold were only used in industry and no longer as jewelry or a store of value? Couldn't we protect the environment if we did without Christmas lights and New Year's Eve rockets and reduced our living space? Or if we used public transport or at least stopped speeding down the highway at 180 km/h?
It's not about enforcing a speed limit or banning Christmas lights. It's about putting this in relation to the benefits. For some people, a decentralized, predictable and tamper-proof network is important, for others it's Christmas lights or being able to speed down the freeway at high speed.
Bitcoin will be worth six figures by 2025 at the latest!
Shouldn't it already be in 2021? Or 2022? That's bullshit, of course, and nobody can know. The fact is that Bitcoin has so far rushed to a new ATH after every halving and then crashed catastrophically. If history repeats itself, Bitcoin should not fall lower than USD 10k and we should see a new ATH at the end of 2024 / beginning of 2025. However, nobody knows whether this will actually happen and whether a potential new ATH will be above USD 100k. Not even Bitcoin prophets.
Bitcoin is going to 0!
No, it won't. At the latest when Bitcoin reaches 1 cent, it will buy up @oliverplass buys the entire stock.
Okay, but Bitcoin has really crashed. Over 60% since the beginning of the year!
That's true, but that's possible with highly volatile assets. An unbelievable bull run is often followed by a huge crash, only for the price to level out again at a fair level. Bitcoin is also up 116% over the past five years, or over 5,000% since 2015. Meta has also lost more than 60% in value since the beginning of the year and is even down around 30% over the past five years. That's part of the investment game. In such situations - as with any other asset - you should ask yourself whether the investment thesis is still intact or not and act accordingly.
Isn't Bitcoin too unsafe for DAUs if the motto "Be your own bank" also entails a high level of risk and personal responsibility?
You mean the users who stash all their money at home in some hiding place and then accidentally dispose of it? But seriously: yes, that is of course a risk. But since I don't see Bitcoin as a global currency, not everyone needs to be able to use Bitcoin. Those who want to use the network will most likely be able to build up the necessary know-how. For people without the know-how but with the desire to use Bitcoin as a store of value, there will be the option of having Bitcoin held securely by a third party - provided the legal framework has been created for this through appropriate regulation.
Bitcoin is totally insecure and can easily be attacked!
Crypto (often) yes, Bitcoin rather not. For details, please refer to my article on the security of cryptocurrencies: https://app.getquin.com/activity/QHAzXeXlSO
Conclusion
I hope I was able to shed some light on the Bitcoin darkness and that we will see more informed and less emotional discussions on the topic on GetQuin in the future. If you have any additions or questions or see things differently, let me know in the comments.
Your CryptoEsel
#learn
#crypto
#bitcoin
#esel
#fakenews
