Follow Slashdot blog updates by subscribing to our blog RSS feed

 



Forgot your password?
typodupeerror
×
Bitcoin The Almighty Buck

Bitcoin and Other Cryptocurrencies Are Useless, The Economist Says (economist.com) 276

With few uses to anchor their value, and little in the way of regulation, cryptocurrencies have instead become a focus for speculation, The Economist magazine said this week. From the story, which may be paywalled: Some people have made fortunes as cryptocurrency prices have zoomed and dived; many early punters have cashed out. Others have lost money. It seems unlikely that this latest boom-bust cycle will be the last. Economists define a currency as something that can be at once a medium of exchange, a store of value and a unit of account. Lack of adoption and loads of volatility mean that cryptocurrencies satisfy none of those criteria. That does not mean they are going to go away (though scrutiny from regulators concerned about the fraud and sharp practice that is rife in the industry may dampen excitement in future). But as things stand there is little reason to think that cryptocurrencies will remain more than an overcomplicated, untrustworthy casino.

Can blockchains -- the underlying technology that powers cryptocurrencies -- do better? These are best thought of as an idiosyncratic form of database, in which records are copied among all the system's users rather than maintained by a central authority, and where entries cannot be altered once written. Proponents believe these features can help solve all sorts of problems, from streamlining bank payments and guaranteeing the provenance of medicines to securing property rights and providing unforgeable identity documents for refugees. Those are big claims. Many are made by cryptocurrency speculators, who hope that stoking excitement around blockchains will boost the value of their related cryptocurrency holdings.

This discussion has been archived. No new comments can be posted.

Bitcoin and Other Cryptocurrencies Are Useless, The Economist Says

Comments Filter:
  • What next? (Score:5, Funny)

    by Kenja ( 541830 ) on Sunday September 02, 2018 @05:18PM (#57243446)
    I bet they'll say my Magic cards & Beanie Babies are useless as well!
    • I have a YuGiOh deck I will sell you for $2000.00. I got it years ago. By now it should be worth $10,000 or more.

    • by Anonymous Coward

      if only there were an online exchange for magic the gathering cards. they could call it oemtg or something like that

    • Re:What next? (Score:5, Insightful)

      by Jason1729 ( 561790 ) on Sunday September 02, 2018 @07:06PM (#57243778)
      You can play a game with Magic cards and enjoy looking at Beanie Babies on your shelf while holding them as a speculative investment. Bitcoin is literally useless.
      • Re: (Score:2, Interesting)

        Bitcoin is literally useless.

        It is better than real money for anonymous transactions, such as buying drugs, or funding an off shore gambling account.

        It is also better than real money for many international transactions. My company employs a graphic artist in Karachi. She emails us her work, and we pay her salary in bitcoins. This is much cheaper and faster than using a bank. We have also made a nice profit from the stash of bitcoins we bought for this purpose several years ago.

        • Re:What next? (Score:5, Insightful)

          by Junta ( 36770 ) on Sunday September 02, 2018 @09:00PM (#57244084)

          Do you actually use it as the negotiated salary? As in 'X' number of bitcoins a year? Presumably you do a last minute calculation based on a more stable currency and by the same token she presumably cashes it out pretty quickly. That's a problem for what is ostensibly a 'currency'.

          It sounds like you may have had a positive experience, purchased X bitcoins, but by the time payday came to pass, you probably needed a lot fewer due to boom, so you had spare. Conversely, if you paid what *should* be enough for her salary, using X USD to acquire them, say a week in advance, but on payday your account is suddenly short, that's a big problem. As it stands, the only way to have predictable income/spend relative to real goods is to minimize the time from when it's a stable currency, to cryptocurrency, and back to stable currency again.

          There's some interesting (albeit too wasteful of energy) technology things going on, but the non-technical context does not bode well for the current cryptocurrencies.

          • Do you actually use it as the negotiated salary? As in 'X' number of bitcoins a year?

            No. Her salary is set in PR (Pakistani Rupees).

            Presumably you do a last minute calculation based on a more stable currency

            Yes. We calculate the BC->PR exchange rate, and send that many BC.

            and by the same token she presumably cashes it out pretty quickly.

            No idea. I never asked her. But I presume that she did, because if she had held onto them she will be a USD millionaire many times over and would would have quit working for us long ago.

            • Re: (Score:2, Insightful)

              by Anonymous Coward

              >because if she had held onto them she will be a USD millionaire many times over

              It is telling that you say it in terms of fiat.

          • Comment removed based on user account deletion
        • You company held bitcoins to pay salaries? That is surprising. Not the paying a salary in bitcoins but the holding of bitcoins. What I've typically seen is a salary is denominated in USD, EUR, etc and on the payday a realtime fiat/bitcoin exchange rate is determined and the equivalent amount of bitcoin is transferred. The recipient typically immediately exchange it for their local fiat immediately unless we're talking zimbabwe, venezuela or some other country in the midst of economic collapse.
          • You company held bitcoins to pay salaries?

            Yes. Salaries are low in Karachi, we pay her about $5000 USD per year. So we bought enough bitcoin to cover that for a few years so we wouldn't have to do a lot of small transactions. We weren't really expecting the surge in value, but now we have enough to cover her salary for a few centuries.

            • by drnb ( 2434720 )
              I get it worked out well but my point was that buying $15,000 in bitcoin could just as easily left the company with $4,000. Its not like a 75% drop and plateauing at that "corrected" level for several years in unprecedented. There must have been an interesting "risk analysis" for that decision. :-)
            • Comment removed (Score:4, Insightful)

              by account_deleted ( 4530225 ) on Monday September 03, 2018 @11:26AM (#57246412)
              Comment removed based on user account deletion
        • Re: (Score:2, Insightful)

          by Anonymous Coward

          anonymous transactions

          "You keep using that word. I do not think it means what you think it means." --Inigo Montoya

          (It might feel anonymous today, but eventually they'll map out all the wallets to real identities and it'll be more traceable than if you had paid with a credit card.)

        • I'm an expat and frequently use a site called TransferWise to move currency between accounts. I think the highest fee I paid was about 1.5% because I was moving a small amount of money (~$150). It looks like they also support transferring to Pakistani accounts. I'm legitimately curious - what kind of fees do you end up paying to move money with Bitcoin?
        • by N1AK ( 864906 )

          It is better than real money for anonymous transactions, such as buying drugs, or funding an off shore gambling account.

          This is said a lot but I'm really not sure how accurate it works out in practice. Sure it's anonymous enough if you're buying the odd ounce of weed, but then so is cash and any number of physical items that could be bartered. The difference with Bitcoin is that if any single transaction gives away (or can be used to narrow down enough) who you are then all your other transactions are compr

      • Bitcoin is literally useless.

        Nearly useless as money but it is useful as a money transfer system. Convert a real currency to bitcoins, transfer to whoever, they convert to a real currency. For the very short time the bitcoins are held the volatility isn't a problem.

        Now if you want to argue that proof of work algorithms are useless given the power consumption, there is that, but Bitcoin does not have to use proof of work, there are other way to maintain a blockchain.

        And speaking of blockchain, Bitcoin is use as a field test of tha

      • Actually playing with the collector grade MTG cards destroys their value.

      • enjoy looking at Beanie Babies on your shelf while holding them as a speculative investment. Bitcoin is literally useless.

        No, really, once you start looking at the hashes, the hashes......I don't even see the hashes anymore. All I see now is blonde, brunette, redhead.

      • Bitcoin is literally useless.

        I happen to like looking at a seemingly random hex string of my speculative investment you insensitive clod.

    • In the preface to "The Picture of Dorian Gray" Oscar Wilde proclaimed "all art is quite useless."

      Yet some art remains pretty damn valuable.
  • by HornWumpus ( 783565 ) on Sunday September 02, 2018 @05:23PM (#57243470)

    'The Economist' might not see evading capital controls as useful, but they are wrong.

    Not an investment vehicle, but for 'in and out' in a day, good enough.

    • When you say 'evading capital controls' you're basically saying 'use it as a means of laundering money' and/or 'use it for criminal activities', which is what I've said about so-called 'cryptocurrency' since the beginning. As anonymous as cash without having to ever physically transfer it.
      • Potato PotAto. The point is, it is personally and socially useful.

        It's only anon, if you only use the wallet for two transactions. Otherwise, one mistake.

        Nations that impose capital controls at their borders are never up to any good. This is a technical check and balance on that particular government overreach.

        • But the point it is it isn't. It's not personally or socially useful because it's not useful. I don't want my money to have good purchasing power one day and then almost none the other. It becomes even worse than the GFC that it was trying to bypass.

          A stable, and widely agreed upon, value is required.
      • by Junta ( 36770 )

        Well, less anonymous than cash in practice. The transactions are out there for all to see, and with cash you can to some extent stuff it in mattresses without too much risk versus BTC where you really have to get the value out of BTC quickly if you really want to know how much worth you have.

      • by MrL0G1C ( 867445 )

        Except cash doesn't automatically record every transaction in a public ledger.

    • by Kjella ( 173770 )

      'The Economist' might not see evading capital controls as useful, but they are wrong. Not an investment vehicle, but for 'in and out' in a day, good enough.

      And that adds some drag in the system, if a lot of people are looking to buy/sell BTC at any given time not to speculate but because they're doing a transaction "via" Bitcoin then speculators will have a market to sell to/buy from. Those passing through doesn't care if the current price is $100 or $1000 or $10000, they're buying and selling in the same market. Volatility is also not a big deal if you do it regularly, you win some you lose some but the net loss due to price fluctuation is probably not that f

    • Re: (Score:2, Informative)

      The Economist is what Nassim Taleb calls IYI -- intelectuals yet idiots. They write what everyone in the IYI circles already think, right or wrong, but they make it sound more intelectual without adding any real depth to it. Proof of that is their poor track record in forecasting.

      • You, some guy with a psuedonymn on a blog, can say that with no risk. Yet a yearly subscription to The Economist (a newspaper that has been published continuously since the 1830s) is about $130 and many successful business people gladly pay that for the information they get from it.

        Here's two cents. Can I subscribe to your newsletter?

        • I believe those successful business people don't pay for information as much as they pay for the feeling they get from it, that they are on top of things and are in the company of great intellectuals. They can also for example feature The Economist on their desks or in their waiting rooms and thus elevate their appearance.

          But I'm not at all saying The Economist is a bad product, on the contrary I think $130/yr for that kind of satisfaction is actually money well spent. I'm just saying the predictive value o

        • by amorsen ( 7485 )

          Come on, the Economist track record isn't half as bad as Wall Street Journal, and WSJ earns way more money than the Economist.

          Wall Street Journal makes money by telling those in power that it is reasonable and proper that they are in power. Arguing that the information in there is useful just because it's expensive is bogus.

    • 'The Economist' might not see evading capital controls as useful, but they are wrong.

      So, they're also useful for crime. Got it.

    • 'The Economist' might not see evading capital controls as useful, but they are wrong.

      The economist sees it just fine. As do the tax departments of various governments of the world when people use a "currency" that has an completely open and public ledger published for all to see.

  • These are best thought of as an idiosyncratic form of database, in which records are copied among all the system's users rather than maintained by a central authority, and where entries cannot be altered once written. Proponents believe these features can help solve all sorts of problems, from streamlining bank payments and guaranteeing the provenance of medicines to securing property rights and providing unforgeable identity documents for refugees.

    I don't see how blockchain is better than a centralized database in any of these use cases. The refugee example especially has many humorous angles: are refugees going to start mining identity-coin on their phones to keep the database up?

    • by gtall ( 79522 )

      I think the use case must revolve around trust. When there is no trust that a central entity can keep information, then it might do better to have a distributed ledger which cannot (I suppose...that's the lore anyhow) be manipulated. If your problem doesn't map to a trusted central entity easily, then a distributed version might be better.

      • That's the major advantage of block chain, indeed the primary use case. However, there are limitations beyond that. For example, there is no way to ensure that a block chain item corresponds to a particular medicine bottle, or that the medicine in the bottle hasn't changed. And I seriously can't conceive how the immigrant block chain example is even close to working.
  • by StandardCell ( 589682 ) on Sunday September 02, 2018 @05:40PM (#57243532)
    All cryptocurrencies are underpinned by the belief that people will trade something of value for them. That usually means currency, but it could also be material goods or intellectual property.

    On top of that value, you have speculation based on other factors; in this case, scarcity and demand. The more the perceived mania continues, the more volatility there will be.

    What is different here is that a number of early adopters held onto the currency, and others bought in late. That distorted people's perception of the cryptocurrency where they thought they could all make money fast. Well, lo and behold, the currency crashed since its peak, and seems to be teetering currently.

    That there are systemic problems with exchanges and blockchain goes without saying. This is unlike traditional currency because the transaction costs are increasing exponentially and putting additional pressure that a normal paper currency managed by a sovereign central bank doesn't have. That reduces monetary velocity through the system and impedes cryptocurrency use for fine-grained transactions. I won't get into the back door idea or breaking the cryptography, although those might become factors in the future. These translate to additional volatility and uncertainty that hurt the value.

    The other big difference between an independent cryptocurrency and a regular currency is who and what backs it. That's probably the greatest concern for The Economist and for those who favor classic economics. This is uncharted territory, and uncertainty will always be punished by the market by participatory withdrawal and diminished value. Only time will tell, but something tells me that Bitcoin and the like may be a game of musical chairs.
    • All cryptocurrencies are underpinned by the belief that people will trade something of value for them.

      And that's quite believable, since people do every day. Sure, a lot of the people involved are just trying to get rich quick, but that doesn't undermine the value in cryptocurrencies. You've got to be able to pay the camgirls without the wife finding out somehow....

    • All cryptocurrencies are underpinned by the belief that people will trade something of value for them.
      Same for fiat currencies.
      Or don't you remember the time, before the EURO, when the most important news was, which currency the central bank is buying to hedge against speculation? Or when the dollar dropped, european central banks did "supporting buys" and when the dollar rose, they sold their surplus?
      There were years where the "Deutsche Bundesbank" made substantial gains by trading foreign currencies.
      So di

  • by King_TJ ( 85913 ) on Sunday September 02, 2018 @06:00PM (#57243592) Journal

    I honestly believe the single biggest impediment to the public accepting crypto as an alternative currency were all the hacks and corrupt coin exchanges that took people's funds and vanished.

    Crypto-coins had the promise of being extremely secure and anonymous, but we quickly saw that unravel as folks learned how to trace transactions back through blockchains and as all of the web site compromises and coin-stealing malware arrived.

    It's still too complicated for the average person to take a payment or spend crypto-currency. The unique wallet ID, alone, is a big, long, messy string of characters that nobody can remember. So they have to pretty much launch their wallet app and copy/paste the thing any time they want to instruct someone else to pay them. So that's another big problem. But really, a lot of this stuff can be coded into a more user-friendly UI, if someone is motivated to do it. (I think that's one of the promises of the new project out there to let independent musicians get paid directly for use of their music, without needing a middle man.)

    But we're far from seeing the whole thing get stable enough so folks have a good handle on just what a given crypto-coin is worth. Everyone I know hanging onto any of them does so with a hope of reselling them at a profit at some later point in time. They're not keeping them like folks collect spare change in jars at home.

    • Those messy strings of characters are primarily to be used as a fallback. QR codes do almost all the real work, usually. It's even fine to print one out and use it over and over again, but you lose the benefit of embedding the price, which is a nice feature.

    • Comment removed based on user account deletion
    • See here [google.com]. I dip my card at the store and by the time my stuff's in the bag I'm done and the bank has recorded the transaction and updated my balance. I know there are attempts to fix this (proof of stake coins come to mind) but they've got problems (proof of stake is open to all sorts of attacks from bad actors flush with cash).
  • Color me surprised.
    Ugh...

  • The scale and scope of crypto is going to take a long time to work out because its such a large, world changing idea. Crypto maximalists know this fully, its not a feeling of 'if' its a feeling of 'when' no matter who talks shit
    • If people start using bitcoin as a replacement for gold as the "fear of inflation" storage place, the value of bitcoin will go up quite a bit.
  • by Anonymous Coward

    ... from when 1 BTC value was a fraction of a dollar.

  • Like I said before, these currencies still have the problem of "99% of it being owned by the 1%" - with that 1% being the geeks this time around.
  • Not stuff that's blindingly obvious and has been from the start.

    • Some of the nerds are pretty naive about real world matters. They know a lot about 6V6 Audio power output tubes, tantalum capacitors, and the comparative differences between a 74LS04 and a 74HC04 hex inverter chip, but are easily taken advantage of when amateur libertarian hucksters show up to ramble about 'fiat currency.'

      These discussions are a social service to the nerd community.

  • But as things stand there is little reason to think that cryptocurrencies will remain more than an overcomplicated, untrustworthy casino. So, it's it's only as useful as the US financial market?

  • Let's not forget that the power consumption is crazy high for what is really a minuscule fraction of the global economy.

    If it *were* to scale to significant portion of the economy, we'd have to magically find more energy than the rest of our uses combined.

    • by Valtor ( 34080 )

      We could use a non-mining cryptocurrency like Credits [credits.com]. I agree that mining seems stupid. All the science that this processing power could help with and instead we waste it.

  • Bitcoin and alts are showing a strong week with lots of good press and impressive reach/significant projects. Queue the bad press for shorts to make a profit.
  • Wait (Score:4, Funny)

    by Hentai007 ( 188457 ) on Sunday September 02, 2018 @10:35PM (#57244314)

    Are you saying imaginary internet money was a poor investment on my part?

  • It seems clear that prices are being manipulated by some of the bigger players. With mining concentrated in some dubious countries as well, expect this to continue
  • "We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run."

    https://en.wikipedia.org/wiki/... [wikipedia.org]

Ocean: A body of water occupying about two-thirds of a world made for man -- who has no gills. -- Ambrose Bierce

Working...