Why Cryptocurrency Is A Giant Fraud

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    • #418685
      eridani
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      • Total Posts: 9,978

      https://www.currentaffairs.org/2021/04/why-cryptocurrency-is-a-giant-fraud

      Many discussions of Bitcoin and cryptocurrency—I am going to use “Bitcoin” and “cryptocurrency” interchangeably for convenience, even though Bitcoin is just a specific cryptocurrency—begin with a long explanation of the blockchain technology that makes it possible. I think for the purposes of talking about what Bitcoin means and does, this is a mistake and a distraction—like having a discussion about the social effects of air travel by talking about how ailerons work. What matters for the purposes of our discussion is that it’s a made-up alternate system of money that, because it’s built on blockchain technology, can be transferred from one person to another without having to go through a bank or a payment processor. Because you don’t have to use a bank, and can easily transfer bitcoin from person to person, it is also “private,” in the sense that you don’t have to give anyone your credit card information or even your name to transfer funds. This makes it particularly attractive to criminals, because it’s sort of like the digital equivalent of cash: easy to hide, tough to trace. And because it’s not tied to a national government, Bitcoin can be used around the world without having to convert currency.

      In fact, it turns out that there are a few advantages to having those “third party intermediaries” from whose tyranny cryptocurrency promises to help us escape. I grumble when my bank stops a payment on my credit card thinking it’s fraudulent, but I like that my bank has fraud protection. (Thanks, federal law, for putting a set of rules in place saying when banks are liable for fraud, thus incentivizing them to catch fraudsters.) Bitcoin’s decentralization means nobody is looking out for you. Nobody. Getting rid of a third-party institution that offers fraud protection is not making your payments “more secure,” it’s making them less secure. The use of “security” here means narrowly “it’s guaranteed that the person who is supposed to receive the money will in fact receive it.” But from the consumer’s perspective, the “security” of transactions is holistic, meaning that it doesn’t matter whether one aspect of the transaction is secure if there are many other aspects that are highly insecure. Often, if you look closely, there are serious qualifications and caveats about the “security” benefits—Bitcoin “can represent a safer alternative to fiat trading if the right conditions are met (namely implementing an effective blockchain analytics practice to remain safe from errant typologies that exist on the blockchain) [emphasis added.]” How likely are ordinary people to even learn what these words mean, let alone know whether they’re implementing them effectively?

      But does cryptocurrency actually offer these benefits anyway? In fact, anyone who starts using Bitcoins and thinks they’re making untraceable transactions is wrong. The very idea that Bitcoin is “anonymous” is highly misleading. Coin Insider comments that “there is no surefire way to maintain one’s anonymity when using Bitcoin.” The Wall Street Journal, discussing how Bitcoin scammers operate, says that while it is a “cat and mouse game” between law enforcement and the scammers, more sophisticated tracking tools are being developed all the time, and the one thing we do know is that the scammed will likely never see their Bitcoin again. In fact, the idea that cryptocurrency is even particularly useful for crimes may be false. The RAND corporation notes that despite the “perceived attractiveness of cryptocurrencies for money laundering purposes . . . an estimated 99 per cent of cryptocurrency transactions are performed through centralised exchanges, which can be subject to AML/CFT [Anti-Money Laundering/Combating the Financing of Terrorism] regulation similar to traditional banks or exchanges.” So nearly all transactions are facilitated by third parties, namely companies that act as “exchanges,” serving as an intermediary that facilitates transactions. These companies are subject to subpoenas just like any other. In fact, if you go on Coinbase—the exchange that is mainstreaming the use of cryptocurrency by making it easy to use—the very first thing you are asked is to verify your identity, giving your name, phone number, the last four digits of your social security number, etc.

      This means that Bitcoin is caught in a paradox: if the reasons why you shouldn’t use it are dealt with, the whole purpose of using it in the first place is defeated. If Coinbase becomes just like PayPal or Venmo, what earthly reason is there for me to convert my dollars into Bitcoin using Coinbase, and transact with someone who will then have to convert the Bitcoin back to dollars (at least if they want to use it almost anywhere)? What added value is being provided by the alternative currency? I’m sure private services will pop up that can help me “implemen[t] an effective blockchain analytics practice to remain safe from errant typologies that exist on the blockchain,” which I’m told I need to do. But then I’m paying someone to help me solve a problem I didn’t even have before, and I don’t get convenience and am still giving a cut to a middleman-type-entity, in this case the person who helps me—the oblivious non-techie—from accidentally screwing up the use of this complicated currency.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #420460
      eridani
      Participant
      • Total Posts: 9,978

      https://markets.businessinsider.com/currencies/news/black-swan-nassim-taleb-bitcoin-open-ponzi-scheme-failed-currency-2021-4-1030339366

      “If you want to hedge against inflation, buy a piece of land,” Taleb said. “The best strategy for investors is to own things that produce yields in the future. In other words, you can fall back on real dollars coming out of the company.”

      He also said bitcoin had failed in its supposed role as a replacement for government-backed money, mainly because of its volatility. The author said he’d been “fooled” into thinking it could be a viable alternative to fiat currency but realized that a currency not backed by a government is “just speculation” and a “game.”

      “I was told it was going to be a currency,” he said, but “you don’t replace the currency with something that’s so volatile that you can’t really commit to a transaction in it.”

      Bitcoin’s price has swung wildly recently. The world’s largest cryptocurrency by market capitalization inched near $65,000 ahead of Coinbase’s listing on April 14. Less than 10 days later, bitcoin slid below the critical $50,000 level, extending losses for the seventh day in a row.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

    • #422401
      Mr. Mickeys Mom
      Moderator
      • Total Posts: 6,204

      Perhaps this is because I am not thinking traditionally when I choose to stack sats of Bitcoin, which, by the way, is not to be confused with the shit-coin that the author of this article is trying to equate with these other cryptocurrencies.

      Do your own homework instead of following the propaganda of Current Affairs.

      Hell, no... I'm not giving up...

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