Bitcoin is the mother of all Ponzi schemes.
It will crash and fade at some point. But on the way to its inevitable death, the journey may make many more insanely rich. This is a global high-velocity bubble, the first in which the entire world can easily participate in.
And so it could be HUGE.
But it will end in tears.
Why? The problem isn’t that Bitcoin is digital. I’m cool with digital.
I do get that paper currency is nothing more than paper printed by a government.
But suppose I started a paper currency, the Asim Dollar, and stated that I legally cannot print more than 1,000,000 Asim Dollars ever, just like the cap on Bitcoin.
The question is would anyone use, or give a value to, Asim Dollars?
If I was the first person to think of this, in amongst a group of cavemen, I might get some traction but once everyone sees others making new paper currencies, the Asim Dollar will collapse.
That applies to Bitcoin too. Bitcoin is open source so it’s damn easy to copy, and those copies can be improved on, which is what we’re seeing happening.
The new copies of Bitcoin address some of the weaknesses of Bitcoin, in particular speed of transaction and the blockchain file size.
So when they’re better where will that leave Bitcoin?
Cryptocurrencies in general also have other fundamental issues. Given they’re decentralised who do you go to if your Bitcoin suddenly disappears? No one.
And can anyone give any assurance that today’s hack of US$64m of stolen Bitcoin will not be the first of many hacks? Nope.
Further, the lack of price stability makes Bitcoin far from ideal as a currency.
The only currencies that have maintained value are ones that are backed by something like gold or ones that are backed by legislation and a government.
Bitcoin is neither.
Bitcoin is a scam. And while blockchain technology has uses, it’s massively overhyped in large part due to Bitcoin itself.
The future of money is digital. But it’s not Bitcoin…