So many things have been said about Bitcoin over the years, from the common ones such as it is a hoax to it will soon burst its bubble. Critics of Bitcoin just keep coming at it repeatedly. We will bring you the top ten arguments against Bitcoin and examine if those arguments hold water or not.
Bitcoin Is Bad For the Planet
In an interview with Andrew Ross of CNBC, Bill Gates raised concerns about the environmental impact of Bitcoin. The cryptocurrency is infamous for the electricity that it consumes. In Bill Gates’s own words, he said, “Bitcoin uses more electricity per transaction than any other method known to mankind, and so it’s not a great climate thing.” To put Gates’s word into a better perspective, an interactive analysis was done by the University of Cambridge Judge Business School to examine the actual cost of energy that Bitcoin consumes. It was discovered that mining Bitcoin consumes more energy per year than the whole of Argentina. Argentina is a country of 45.51 million people.
From a wider perspective, the climate footprint of Bitcoin is still little compared to other industries in the digital space. So, on a wider scale, there are bigger climate villains in the digital industries that Gates should probably be more worried about. According to Arcane research, Bitcoin makes up just 2.3% of the digital tech emissions. Yes, it is right to be worried about our carbon footprints as our planet heats up and we face climate change. However, this argument against Bitcoin concerning its environmental impact is selectively blind to the fact that there are bigger energy users in the digital tech space.
Bitcoin’s climate footprint of 37Mt CO2 is still minuscule compared to other digital industries.
The total GHG emissions from digital tech are estimated to 1600Mt, with Bitcoin contributing to roughly 2.3% of the
digital tech emissions. pic.twitter.com/n3hWiFfpxm
— Arcane Research (@ArcaneResearch) February 16, 2021
Bitcoin Has No Intrinsic Value
Another top argument against Bitcoin is the lack of intrinsic value. Many see it as a purely speculative asset with no intrinsic value and will never have one. For better understanding, intrinsic value is the value a commodity has by itself, it is not dependent on an extra source for this value. Honestly, Bitcoin doesn’t seem to have this feature, as its price is solely dependent on the market forces of demand and supply.
However, just like Bitcoin, most fiat currency does not have intrinsic value too. Their value is obtained because it is backed by the government and people trust and accept it for the payment of goods and services. Interestingly, fiat currencies are also dependent on the market forces of demand and supply as well as the issuing body stability. In a similar vein, Bitcoin obtains its value from the backing of the people and the trust they have in it as an acceptable store of value and payment for goods and services.
Bitcoin Is a Bad Investment for Recession
Much has been said about how Bitcoin can’t cushion the impact of a recession and Anton Tasarov from crypto briefings has something to say about that. Even though Bitcoin should have seen an economic downturn as perfect thriving ground, Tasarov noted that Bitcoin has failed to fulfill that promise to hedge the impact of a recession. Most notably during the crash of March 2020, Bitcoin has posed to be the decentralized method of transferring and storing value that comes with defined rules on issuances. With this, Bitcoin looks like it could be an ideal cushion against the next hyperinflation or recession. However, in reality, it failed to hold up well when tested in the face of recession.
Here are the reasons that are given for this argument. The first one is that Bitcoin is slow and costly. In reality, Bitcoin is slow compared to other cryptocurrencies in the market and it could take between five minutes and one hour based on the network to process a transaction. Secondly, Bitcoin is quasi-decentralized in the sense that the control of hash rates is in the hand of a few mining pools.
Bitcoin Is a Criminal Haven
So often, you hear that Bitcoin is a haven for criminals, and that has often been the argument against cryptocurrency in the traditional media. However, does this argument hold water or is it just another inflated fear about Bitcoin? Many point out criminal activities that involve Bitcoin as their reference for this argument. For example, we have seen the ransomware industry changing its tactics from demanding cash to demanding Bitcoin.
However, it this enough to nail Bitcoin as the new general commander for criminal activities. A title that arguably belongs to fiat currencies. Well on further observation, this argument against Bitcoin seems off totally. Why so? Bitcoin is a public ledger where every transaction ever carried out is visible to the public. Even though, the identity of a transaction originator or receiver maybe not link instantly. However, it is possible to do so, and once that happens every transaction ever done by a particular individual on the network can be traced. That makes Bitcoin a bad vessel for shady businesses in the actual sense of things. A fact check by the Quebec government in 2018 showed that there is no significant link between the activities of criminals and Bitcoin.
The Government Could Shut It Down
Another argument that is used against Bitcoin and used to discourage those interested in the technology is that Bitcoin activities can be shut down by the government. How true is that though? Can the government effectively shut out everybody from holding Bitcoin? Well, technically that is impossible. That is because Bitcoin is a decentralized network spread across several nodes in different parts of the world. That will make it difficult for a single government to ever shut it down.
However, some governments could make it very hard to hold Bitcoin or transact through series of regulations meant to cripple it. Also, the Bitcoin blockchain could be affected by government policies that can result in systemic risk. For example, if the Chinese government should decide to regulate Bitcoin activities in certain ways that could affect the network, it could have catastrophic results given that China houses over 50% of the Bitcoin mining activities. So, even though governments can’t entirely shut out Bitcoin, they can still affect the network capabilities and characteristics substantially.
Bitcoin Is Too Volatile to Be a Global Currency
So many know about the legendary volatility of Bitcoin and so much has been said about it too in the financial circle. The argument is that Bitcoin in its current state is too volatile to be considered a global medium of exchange in the official channel the same way the US dollars are. This thought is echoed by, Berkshire executive Charlie Munger, who doesn’t think Bitcoin can ever take over as the global currency. Top payment giants like MasterCard also don’t feel Bitcoin can feature as part of its recently announced plan to integrate cryptos into its network. The executive vice chair Ann Cairns doesn’t believe Bitcoin can work out as a payment tool as it is too volatile and takes longer than most cryptos to process transactions.
In a similar vein, the Federal Reserve has struck out Bitcoin as an effective alternative to USD for global payment. Right now, most individuals in the financial see Bitcoin as an optional asset. So, as most financial institutions and powerful individuals in the financial industry arguing against the use of Bitcoin as a global currency, cryptocurrencies will not eclipse the global fiat currency at the moment. Its volatility will likely continue to be a major hindrance to achieving that status of a global tender.
Bitcoin Can Be Cloned
Bitcoin can be cloned by anybody has always been another argument used by critics against Bitcoin. Is this claim true? It is not entirely true in the sense that Bitcoin is Bitcoin and can’t be cloned. However, a developer can copy the Bitcoin open-source codebase to create a new coin, which results in new forks of Bitcoin. We have seen hard forks of Bitcoin like Bitcoin cash, Bitcoin gold, etc. However, these forks are not the same as the original Bitcoin. They are entirely different, separate from the original, and can’t communicate with the original Bitcoin.
So, even though developers can copy the Bitcoin codebase, they can’t clone the acceptance, security, market dominance that Bitcoin has in the market. Even with all these forks, none has come close to the value of Bitcoin that achieved its value through its finite and digital scarcity, censorship-resistant, and decentralized nature.
Bitcoin Is a Bubble
Here is another recurring argument against Bitcoin that many in the financial market have stood upon. Bitcoin the mother of all bubbles according to Michael Hartnett the Chief Investment Strategist of Bank of America Securities. Mr. Michael is basing his verdict on the speed and strength of Bitcoin’s price increase. The recent price rise at the beginning of 2021 has strength this line of argument that has plagued Bitcoin for years. The line that Bitcoin is a bubble driven by euphoria and manipulation of the market.
However, the speed and strength of the price rise of a commodity is not the only feature used to judge if it is in a financial bubble. Years of observing the Bitcoin spectacle have shown otherwise that, this cryptocurrency is a valid monetary creation. It has been shown to outperform government-issued fiat currencies in the free market and it is even pointed out that Bitcoin could be the anti-bubble to other bubbles in the economy. We have seen investors buying Bitcoin as a store of value to escape the hyperinflation that hit some fiat currencies causing them to lose value. Some buy the crypto to escape what they perceive as a huge sovereign bond bubble that the government is trying to keep down by printing more fiat currency.
Bitcoin Can Be Hacked
We have heard of various Bitcoin hacks in the news and social media with criminal masterminds carting away millions worth of cryptos. With this spring up the argument that Bitcoin can be hacked just like every other financial system. Is there any truth in this? No, this argument is based on a misconception. How so? The main feature of Bitcoin is decentralization and that is the main thing that gives it its renowned level of security. Several nodes based around the globe maintain the Bitcoin network. It has to become more centralized for opportunities to arise for a bad element or weak link to compromise the network.
Since its inception in 2009, the Bitcoin network is yet to be hacked. However, there have hacks that affected exchanges and wallets, which is what likely brought about the misconceptions around Bitcoin. Since the Bitcoin blockchain is always monitored by the whole participating network, manipulating the blockchain is extremely hard. It will require what we know as the 51% attack to render it hackable. This is when a cybercriminal gains more than half control of the entire network, which is too expensive to carry out and maintain to sustainably hack the network and make a profit. A cybercriminal seeking to gain 51% control of the network will need to invest about $400M.
Bitcoin Is Not Scalable
One argument against Bitcoin that can hold ground very well is the one that says Bitcoin in its present form is not scalable. This argument is well placed, as scalability is one of the current setbacks of Bitcoin. The network scalability problem is due to the fact that the number of transactions that the network can process is limited. That is due to the limited frequency and size of the blocks that make up the Bitcoin blockchain where transaction records are kept. As such the Bitcoin network is only able to process a specific number of transactions per block in a specific time frame.
For the sake of context, Bitcoin can only handle around an average of 3.5 transactions per second according to bit2me academy. The industry puts this average at around 7 transactions per second. In comparison, Visa can handle 56000 transactions per second. So, at the current rate, Bitcoin is not equipped to take on payment processing on a global scale. So, unless the issue of scalability is solved this argument will continue to hold against Bitcoin.
With all that has been said, while some arguments hold to their claims, some are just born out of pure misconception and misplaced fear of the unknown. However, what is clear is that Bitcoin is not a perfect technology without flaws. As a matter of fact, no technology is without its flaws.
Bitcoin technology is still in its developing stage with works ongoing and as such, it is certain to see improvement in its core technology over time.
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