Bitcoin is crypto and crypto is dead. Long live the Bitcoin!
Huh?
Just as confusing as the headline I chose for this post are the statements I've been reading more and more lately on GetQuin about bitcoin and crypto. I don't feel like constantly repeating every argument in umpteen comment columns. Therefore this "small" contribution ( @InvestmentPapa I hope that between us fits now again 💖), which should clear the most common misunderstandings about Bitcoin and crypto out of the way and which I just have to link in the future. I will add to the post as needed. Should you also be confused, let me know in the comments. Provided I deem you worthy, I will include and untangle your confusion in this post.
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 posts "Cryptocurrencies for Stock Market Disciples" exclusively on GetQuin:
What are cryptocurrencies and what 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 operates completely 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 central entities like banks are needed to send it around the world
- ... there is no trustworthy authority behind it, which ensures the preservation of the purchasing power
- ... scaling presents the Bitcoin network with real, possibly unsolvable challenges.
Bitcoin is like gold, except that ...
- ... it can be transported and divided much more easily
- ... its authenticity can be confirmed even by laymen
- ... 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 is 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 central 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 this point in time, there is little reason to worry in our Western world that we will soon have to rely on such a network. In other countries, however, things are already looking different. Besides, no one knows what the future will bring. If you still don't see any added value in a decentralized, tamper-proof and predictable network, Bitcoin is definitely not for you. Unless you switch to the side of the speculators.
What is the difference to "crypto"?
"Crypto" usually refers to altcoins, which are all cryptocurrencies except Bitcoin. Bitcoin fans now place a lot of emphasis on the fact that Bitcoin is not a crypto. Why? Because Bitcoin focuses on (tampering) security and decentralization without compromise. Altcoins usually focus on other things, such as speed or additional functions like smart contracts. Decentralization and security are then gladly sacrificed for this. This is nonsensical. 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 also have it operated directly by a company, a bank or a state. That is more efficient.
Bitcoin provides a decentralized, tamper-proof and predictable network. Thus, it has a raison d'être (for some). Altcoins do what any centralized institution could do, only much more inefficiently than a centralized solution. So the raison d'être of altcoins can certainly be questioned, or at least must 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 rest of the cryptocurrencies primarily in its focus and distribution.
After these basics, let's get to the statements and questions I keep reading on GetQuin:
Example FTX: Who should we trust here, please? The bubble has long since burst!
The bankruptcy of FTX, the collapse of Terra Luna or even 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. But they all have something in common: They disregarded the most important features of Bitcoin.
FTX was central. Few people had full control over 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 centralized, 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 bypass the company's security mechanisms and thus steal Bitcoin and / or it was an inside job. Bitcoin was not attacked in the process. It is insane to leave a decentralized asset to a central, unregulated entity to manage.
Terra Luna was developed by a central foundation. Mechanisms and functions were implemented whose security could not be guaranteed. These mechanisms were exploited and thus the collapse was initiated. Bitcoin was not attacked in the process. Bitcoin does not dare to experiment. Its code is relatively simple and has been permanently 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 fast money. I think it should be clear to everyone that the growth of this ecosystem has been anything but sustainable and is a gigantic bubble. The zombie companies / coins from cryptospace, so to speak. It is good that this bubble keeps bursting to allow sustainable and serious growth. Even if there are a few pawns to regret. Without wild speculation, greed, laziness and the unjustified trust in centralized, unregulated entities, 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, because 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. Bitcoin also cannot be used to process a large number of transactions because the network scales too poorly for this. Scaling solutions like the Lightning network have yet to prove themselves. The only chance I see of Bitcoin becoming a world currency is a global revolution by the people. But even then, in my estimation, a return to the gold standard is more likely than introducing 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. In addition, there are general uncertainties due to the still very young age of Bitcoin and the resulting lack of historical data. Currently, investing in Bitcoin is a bet that the fair value of a Bitcoin is above the current value (or that you can sell at a good time). Where this fair value lies, no one can say. At 1 million euros? At 1,000 euros? At 2 euros? Only when the gamblers have largely disappeared and people are investing in Bitcoin because of its characteristics will we get an idea of what the real value of Bitcoin is. And then, precisely because of its properties, it should also serve as a store of value.
All the Bitcoin fanatics are really getting 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 responsible for the bad reputation and high volatility. People who buy Bitcoin without sense and reason and only for speculation, heat up the market and spread crazy slogans about Bitcoin or the FIAT system (you can also see them at some Bitcoin-Maxis), which are chalked up by No-Coiners completely rightly or torn apart in the air.
It makes no sense whatsoever to seriously discuss bitcoin or crypto with such people. Don't take these slogans too seriously. People often (not always) try to mask incompetence and cluelessness by being loud. But please stay open for discussions and arguments with animals (and people) who seriously deal with the matter. Not all of them are 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 21 million limitation. But just because Bitcoin's code has been changed doesn't mean there will be more than 21 million Bitcoins. The changes to the code must be accepted by the miners and node operators. That is, any change to the code needs the approval of three distributed parties: The adjusted code must be accepted by the majority of developers and adopted by both the majority of miners and node operators. This is, due to the decentralized nature of Bitcoin, not readily possible. Moreover, the players involved would cut their own flesh with such an action, as trust would be destroyed and Bitcoin would thus 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 as every system before and after it has collapsed and will collapse. But that is not dramatic because it will be replaced by a new system. That this new system will be Bitcoin, of all things, is nothing but wild speculation. So is the question of when the system will collapse. Tonight? Next year? In 2,000 years? All the more important to invest one's money and not to collect it under the pillow, so that such a crash does not mean financial ruin. Broadly spread is king here. Anyone who puts all his eggs in one basket - be it Bitcoin, real estate, gold or a single share - is taking too high a risk.
A hedge against inflation? Don't make me laugh!
True, Bitcoin does not currently protect against inflation because it is too volatile and its value is largely determined by speculators and gamblers. However, should Bitcoin manage to address a larger market and stabilize, it will, due to its characteristics (which are not deflationary by the way, the amount of Bitcoins available will grow every few minutes for the next 100 years), serve as a hedge against inflation and store of value. Similar to gold. Whether Bitcoin will reach this status and where its equivalent value in euros will be then, however, is nothing more than speculation.
Bitcoin does not make a profit and does not pay out dividends!
Correct. But neither do gold and FIAT money. On the contrary, the available amount of FIAT money keeps increasing and that in much larger steps than it is the case with Bitcoin. Many of you have certainly also put money into an unprofitable growth stock. Not only did it not generate a profit and pay a dividend, but it even lost money year after year - and may have grown 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 for a state as a currency. 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 sense and reason and the price, also for the reasons already mentioned, rushes into the basement. Just as with FTX, MTGox, Terra Luna and all other debacles in cryptospace, Bitcoin cannot be held 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 business or individual, there needs to be a legal framework for trading, storage and taxation. Bitcoin does not mean moving in legal free spaces. In the long run, Bitcoin will benefit from regulation. This may prevent or at least reduce new cases like FTX in the future. Regulating Bitcoin / crypto does not mean that these decentralized networks will pass into government hands. They can't do that because of their decentralized nature. Bitcoin is here to stay and will remain so as long as people see value in it. A state can ban Bitcoin, but it cannot control Bitcoin.
Bitcoin is harmful to the environment and should be banned!
Yes, running the Bitcoin network requires electricity. Yes, manufacturing the hardware that runs the network requires raw materials that cannot be used for anything else. But the question is not whether or not Bitcoin is harmful to the environment (it is, just like pretty much everything else we do), but whether the benefits Bitcoin provides outweigh the harm it does. 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 that 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 took public transportation or at least stopped speeding down the highway at 180?
It's not about enforcing a speed limit or banning Christmas lights. It's about putting it in relation to the benefits. For some people, a decentralized, predictable and tamper-proof network is important; for others, Christmas lights or being able to speed down the highway at full speed are important.
Bitcoin will have six digits by 2025 at the latest!
Shouldn't it already be in 2021? Or 2022? Of course, this is bullshit and no one can know. The fact is that bitcoin has rushed to a new ATH after every halving so far and then crashed catastrophically. If history repeats itself, bitcoin should not fall lower than 10k USD and we should see a new ATH in late 2024 / early 2025. But of course, no one knows if this will actually happen and a potential new ATH will be above 100k USD. Not even bitcoin prophets.
Bitcoin is going to 0!
No, it won't. At the latest, when Bitcoin stands at 1 cent, buy up @oliverplass the complete stock up.
Okay, but Bitcoin has really crashed. Over 60% since the beginning of the year!
True, but that is possible with highly volatile assets. It's not uncommon for an incredible bull run to be followed by a terrific crash, only for the price to settle back down to a fair level. Bitcoin is also up 116% on a 5-year view, or over 5,000% since 2015. Meta has also lost more than 60% in value since the beginning of the year and is actually down about 30% on a 5-year view. That is part of the investment game. In such situations, one should ask oneself - as with any other asset - 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 great risk or personal responsibility?
You mean the users who stash all their money at home in some stash that is then accidentally disposed of? But seriously, yes, of course that is a risk. But since I don't see Bitcoin as a global currency, not everyone needs to know how to use Bitcoin. Those who want to use the network will very likely also 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 possibility of having Bitcoin securely stored by a third party - provided that the legal framework has been created through appropriate regulation.
Bitcoin is totally insecure and can easily be attacked!
Crypto (often) yes, Bitcoin rather not. For details, I refer you to my post on cryptocurrency security: 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 again in the future. If you have any additions or questions or see something differently, let me know in the comments.
Your KryptoEsel
#learn
#crypto
#bitcoin
#esel
#fakenews
