Daniel Halliday
Jul 24, 2018 · Last update 1 yr. ago.

Is bitcoin a speculative bubble?

Can cryptocurrencies work to the extent that they could be viable as a currency? Or are they all just a speculative bubble?
Stats of Viewpoints
Bitcoin and blockchain’s decentralised database technology will lead to an environmental disaster
0 agrees
0 disagrees
It may well be, but it still has uses and blockchain technology will be revolutionary
0 agrees
0 disagrees
Cryptocurrencies are a concept that cannot be compared to how we use currencies today
0 agrees
0 disagrees
Bitcoin has no intrinsic value, doesn’t work as a currency and will inevitably crash as an asset
0 agrees
0 disagrees
Viewpoints
Add New Viewpoint

Bitcoin and blockchain’s decentralised database technology will lead to an environmental disaster

With the already monumental energy consumption this technology requires, and the accelerating rate of growth of blockchain technology, many have warned of what a big environmental disaster blockchain technology could represent. As so much computing power is needed across many servers to verify a decentralised blockchain database, the power consumption of Bitcoin mining alone is thought to currently be greater than that of some countries entirely. This would mean that Bitcoin alone is already indirectly responsible for several million tonnes of carbon emissions, and with the popularity and implementation of this technology growing; this problem will only get worse.

Blockchain's power consumption is difficult to measure, as the industry is spread across the world and is fairly secretive, dealing with encrypted information. Alex de Vries, an analyst and blockchain specialist, tried to establish a detailed estimate, averaging blockchain's consumption to an annual amount of 32TWh as of December 2017, which is the estimated consumption for the whole of Denmark (2014). However these estimates are based on assumptions that all parties working with cryptocurrencies are using energy efficient technology, and due to the fact that many miners may use less advanced solutions the actual consumption is likely much higher.

The ultimate price of bitcoin and cryptocurrencies will be worse than an economic crash, they will be a major contributor to climate change, accelerating a problem we currently have no solution for. A realistic estimate of energy consumption linked to blockchain technologies needs to be established, so a maximum threshold can be set or at least a more accurate picture can be fed into models and more accurate pictures can be portrayed when trying to establish solutions to this problem. Unless innovation can solve the problem of our dependency on fossil fuels or blockchain technologies can be further innovated themselves we run the risk of accelerating toward environmental problems such as climate change even faster. arstechnica.com/tech-policy/2018/05/new-study-quantifies-bitcoins-ludicrous-energy-consumption techbullion.com/the-blockchain-technology-and-its-impact-on-global-warming technologyreview.com/s/610783/bitcoin-would-be-a-calamity-not-an-economy

Agree
Disagree
Latest conversation
Daniel Halliday
Mar 27, 2019
Approved
DH edited this paragraph
With the already monumental energy consumption this technology requires, and the accelerating rate of growth of blockchain technology, many have warned of what a big environmental disaster blockchain technology could represent. As so much computing power is needed across many servers to verify a decentralised blockchain database, the power consumption of Bitcoin mining alone is thought to currently be greater than that of some countries entirely. This would mean that Bitcoin alone is already indirectly responsible for several million tonnes of carbon emissions, and with the popularity and implementation of this technology growing; this problem will only get worse.

It may well be, but it still has uses and blockchain technology will be revolutionary

Blockchain will have applications despite bitcoin’s success. Even if blockchain currencies do not overtake fiat currency, blockchain’s model of secure decentralised storage of data will revolutionise secure database technology. It is set to revolutionise how contracts, banks, and artistic royalties function and is likely to diversify in time, possibly revolutionising politics, legal and financial systems beyond recognition in the long run also.

The internet has marked a period of change for the arts and especially for the music industry. An average of 86% of artist's proceeds from their music are thought to be lost in unpaid online royalties alone. Distributed ledge technology could prove to be revolutionary in addressing this problem, as it could not only allow instant royalty establishment through smart contracts, but could also underpin a system of cryptographic watermarks, were royalties are perfectly allotted to the appropriate artist’s streamed content.

Smart contracts, contracts based on blockchain, where trust is written into the technologies distributed ledger, are more likely to be revolutionary before the possibility of widespread utilisation of cryptocurrency. Such solutions will allow parties to make secure agreements and transactions that are self secured and decentralised not requiring an authority to guarantee the contract or agreement, saving money, time and bureaucracy. Smart contracts are undeniably faster, cheaper and more secure than traditional systems that involve middlemen to secure trust, and are set to be used for in everything from healthcare to real estate industries, from legal to financial systems. bbntimes.com/en/companies/blockchain-will-revolutionise-global-trade-and-transport inc42.com/resources/blockchain-impact-legal-ecosystem nasdaq.com/article/how-blockchain-technology-can-transform-royalty-payments-cm786646 blockgeeks.com/guides/smart-contracts

Agree
Disagree
Latest conversation
Daniel Halliday
Mar 27, 2019
Approved
DH edited this paragraph
The internet has marked a period of change for the arts and especially for the music industry. An average of 86% of artist's proceeds from their music are thought to be lost in unpaid online royalties alone. Distributed ledge technology could prove to be revolutionary in addressing this problem, as it could not only allow instant royalty establishment through smart contracts, but could also underpin a system of cryptographic watermarks, were royalties are perfectly allotted to the appropriate artist’s streamed content.

Cryptocurrencies are a concept that cannot be compared to how we use currencies today

There is an inherent flaw in arguing that bitcoin is a speculative bubble, and does not have intrinsic value, without accepting that fiat money, as in national currencies, are also subject to this same criticism. If it wasn’t speculative and was backed by a physical asset, it would be impossible to keep it decentralised, which is the most exciting prospect with bitcoin or other cryptocurrencies. Such currencies are a new concept that defy definition by previous limitations imposed on currencies, their use may change as the technology and society does, but they are more than just a speculative asset.

Furthermore even with fiat currencies, there are no prices that are not somewhat speculative, with currency speculation being able to devalue or inflate a currency to a point at which a country’s stock market and overall economy can start to follow suit. This has been linked to financial crises, with fiat money being inflationary, fostering speculative bubbles itself and luring individuals, banks and states into traps of excessive debt. However crytocurrencies, despite being speculative, are a unique digital asset and are formed from entries into the most secure database in the world, so the comparison to fiat currency is not even a useful. Even security software is not as secure as blockchain systems, but bitcoin is built on a foundation of decentralised security, so provides a service that is fairer, more transparent and more secure than fiat currency.

Cryptocurrencies are also new technology, they may require development as their usage increases, as with all technology, bitcoin requires adopting and incorporating to function fully. As countries such as Sweden and China try to move towards being cashless societies and world tourism becomes ever popular, cryptocurrencies will offer more flexible monetary solutions and inevitably become more popular also. As countries currencies move away from paper and move online it is likely that transitions to cryptocurrencies will become more common, either due to investment or trying to utilise the decentralised nature of the currencies to avoid international banking charges. cryptocoinmastery.com/sweden-first-cashless-society-chose-bitcoin news.ycombinator.com/item?id=15315813 investorguide.com/article/11846/understanding-the-risks-of-currency-speculation-igu

Agree
Disagree
Latest conversation
Daniel Halliday
Mar 27, 2019
Approved
DH edited this paragraph
Furthermore even with fiat currencies, there are no prices that are not somewhat speculative, with currency speculation being able to devalue or inflate a currency to a point at which a country’s stock market and overall economy can start to follow suit. This has been linked to financial crises, with fiat money being inflationary, fostering speculative bubbles itself and luring individuals, banks and states into traps of excessive debt. However crytocurrencies, despite being speculative, are a unique digital asset and are formed from entries into the most secure database in the world, so the comparison to fiat currency is not even a useful. Even security software is not as secure as blockchain systems, but bitcoin is built on a foundation of decentralised security, so provides a service that is fairer, more transparent and more secure than fiat currency.

Bitcoin has no intrinsic value, doesn’t work as a currency and will inevitably crash as an asset

To be used as money successfully cryptocurrencies including bitcoin need to function as a medium by which value can be exchanged. For monetary systems to operate it is imperative that money holds some steady degree of value over time, so that loans and payments over time can be arranged. Bitcoin is too volatile to function in this way, with no intrinsic value, and therefore is functioning as a speculative asset, not as a viable currency.

Speculative bubbles refer to a financial crisis in which speculation of an asset’s value far exceeds its intrinsic value. This situation can be first noted in 17th and 18th centuries, initially with the sale of certain fashionable tulip bulbs in Holland, prices per bulb going beyond the average yearly Dutch salary before crashing spectacularly. Similarly the British South Sea company, who were granted a monopoly over trade in South America despite Britain’s involvement in a War with the Spanish at the time, who were in control of South America during the 18th century. Regardless of this contradiction, stocks in the company were traded at increasing prices, despite no British trade having occurred in South America.

There are also more modern examples of a speculative bubbles bursting and damaging the economy and all investors. The late 1990’s dot-com bubble was linked to overestimating the value of early online companies, which was thought to have been a major contributor to the 2001 stock market crash. It all stemmed from unrealistic expectations of what internet companies could achieve and ended costing investors $5 trillion, when the bubble burst. Arguably due to the lack of value in this asset, it seems that cryptocurrencies are just the next big speculative investment bubble. thebubblebubble.com/south-sea-bubble moneycrashers.com/dot-com-bubble-burst/https://www.moneycrashers.com/dot-com-bubble-burst cnbc.com/2017/12/04/bitcoin-is-a-dangerous-speculative-bubble-yale-expert-says.html

Agree
Disagree
Latest conversation
Daniel Halliday
Mar 27, 2019
Approved
DH edited this paragraph
Speculative bubbles refer to a financial crisis in which speculation of an asset’s value far exceeds its intrinsic value. This situation can be first noted in 17th and 18th centuries, initially with the sale of certain fashionable tulip bulbs in Holland, prices per bulb going beyond the average yearly Dutch salary before crashing spectacularly. Similarly the British South Sea company, who were granted a monopoly over trade in South America despite Britain’s involvement in a War with the Spanish at the time, who were in control of South America during the 18th century. Regardless of this contradiction, stocks in the company were traded at increasing prices, despite no British trade having occurred in South America.
Translate