Bits are not coins!



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An honest opinion from an Economist and Environmentalist

The sooner you get out of cryptocurrency the better.

Cryptocurrencies or blockchain based financial instruments make NO ECONOMIC sense. Basic economics tells you if supply is unlimited the right price is zero. Even if it is a great thing, like the air we breath.

But on the contrary cryptocurrencies are not a good thing. So as an environmentalist I must say cryptocurrencies make NO ENVIRONMENTAL sense. To use such vast energy resources for virtual mining is a total waste of our precious earthly resources, which contributes to climate change and the loss of biodiversity - the destruction of our Earth as we know it. (Incidentally the same applies on a smaller scale to gold mining). When every other industry is moving towards sustainability it is stupid to take finance in the opposite direction.

Cryptocurrencies are only hype. Indeed there is a lot of hype going on, even robots and morally deprived people are employed pretending to be successful beautiful young women to entice young nerds and all sorts of people to invest their hard earned savings in real or fake cryptocurrencies. It does not matter which because in the end neither is of any value.

Although the supply of a particular cryptocurrency may it self be limited in supply, there is in fact endless supply because it is always possible to create yet another new currency.

There are popular myths about cryptocurrencies.

  • That they are not traceable: The truth is that they are very traceable as is already evident from high profile cases.

  • That they cut us free from the banks: The truth is that the banks see them as an opportunity to make more money.

  • That the whole infrastructure of the payment system is somehow free: The truth is that it is now a side product of the mining, but when there is no more mining, the payment system collapses.

  • That the value will always go up: The truth is that there will be wild fluctuations and eventually the balloon will burst - exactly when, nobody knows.

  • That an ordinary person can play the market: The truth is that when push comes to shove, the real pros will be faster than you and you will be the looser.

  • That they eliminate the cost of currency exchange: The truth is that instead you incur costs when changing to normal currencies.

  • That they can be used for ordinary transactions: The truth is no way. In a competitive market, price is set close to production and distribution costs, to try set prices with a wildly fluctuating currency is simply not doable. In reality the same applies to savings, do you really want to bet your standard of living in your old age on whether a currency goes up or becomes worthless?

  • That economists, bankers, investors, world economic forum, that beautiful girl you met on the Internet but you have never seen, will give the best advice: The truth is they are hoping to make money out of you.

Related to digital currency is the concept of digital only currencies. On the surface they seem to be a generally good idea, but the problem is that under the wrong regime they will be used to control people and abuse power. And no matter how good the intentions of current governments are, it is not at all unlikely that any nation could have a period of evil government.

All governments that care about this world and its people should ban everything to do with virtually mined currencies. The same applies to all individuals: Stay clear of cryptocurrencies.

Following the cryptocurrency exchange FTX collapse and even before, some people where calling for the cryptocurrencies and various services involving them to be regulated. That would be no solution because if the intrinsic value of cryptocurrencies is zero, no amount of regulations will protect those that are foolish enough to invest in anything that has to do with them.

If you own some cryptocurrency or you are thinking about getting involved with the business, do not take this as an attack on your property or ideas but as good advice based on real economic and environmental principles.

Am I writing this because I am so happy with the current monetary system: HELL NO. There is a lot wrong with the monetary system around the world which can be improved. (Indeed I offer my services to any government that would like to make a more just and functional monetary system.) But cryptocurrencies are not the solution. Far from it.

cryptono@iceland.edu

URL to this letter https://open.letters.international/bitcoin


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Some bubbles have burst - the trend will continue. At what phase or if there will be a short term rebound nobody knows - but eventually the whole thing will burst

Useless for both legitimate & illegitimate transactions

Gold mining is not any better