I talk to a lot of people about crypto, and mostly they regurgitate the same questions and concerns as each other – “it’s not backed by anything so it’s worthless”, or “it uses too much electricity!”.
Here I’d like to address some of the common arguments against Bitcoin and cryptocurrency to hopefully put some of these arguments to bed.
Bitcoin has no intrinsic value
According to corporatefinanceinstitute.com,
“On a fundamental level, currency value is determined by supply and demand, both domestic and foreign. Increased demand appreciates the currency value, while increased supply decreases the currency value. Many factors may affect currency value, such as:
Currencies of countries offering higher interest rates tend to increase in value, all else being equal. This is because fixed-income investors flock to higher interest rates, which increases the currency’s demand and value.
High inflation erodes the purchasing power of the currency holder and increases the cost of local goods. Countries that experience higher inflation may experience a decrease in currency demand, and therefore a depreciation in currency value.
Money supply refers to the money within a country at a given point in time. The higher the money supply, the lower the currency value and vice versa.”.
If we use the above as a measure, and compare it to the current financial situation, particularly in the United States, we have: an increased supply (as the Fed continues to print more and more money); low interest rates (2.5% at time of writing); and high inflation.
Compare this with Bitcoin which: is decreasing in supply (with each halving); is not subject to interest rates as there is no central authority to change interest rates or even HAVE interest rates; is DEFLATIONARY and hard-capped at 21m Bitcoins.
“It’s essential to compare Bitcoin energy consumption with all the aspects of the classical monetary payment system. This coverts banknotes and coins cash management in ATM systems, card payments, point of sale (POS) payments, banking and inter-banking energy consumption, etc
Valuechain discovered … the traditional banking system — was determined to have a shocking annual energy use profile of 4,981 TWh compared to Bitcoin’s 89 TWh.
“We demonstrate that Bitcoin consumes 56 times less energy than the classical system, and that even at the single transaction level, a PoW transaction proves to be 1 to 5 times more energy efficient. When the Bitcoin Lightning layer is compared to [the] Instant Payment scheme, Bitcoin gains exponentially in scalability and efficiency, proving to be up to a million times more energy efficient per transaction than Instant Payments,” the Valuechain paper reads.
It is now also estimated that around 50% of all Bitcoin mining is done using renewable energy.
According to Forbes:
“The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers).”
The article went on to state:
“According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using cryptocurrency transactions is much smaller than fiat currency and its use is going down year by year.”
“Capital One [Bank] admitted to willfully failing to implement and maintain an effective Anti-Money Laundering (AML) program to guard against money laundering. Capital One also admitted that it willfully failed to file thousands of … suspicious transactions … including proceeds connected to organized crime, tax evasion, fraud, and other financial crimes laundered through the bank into the U.S. financial system.
The above article demonstrates that whilst cryptocurrency can be used for illegal activities (just as any currency can), the current financial system accounts for way more illicit activities. What’s also shocking is that these illegal activities are INTENTIONALLY conducted by financial organizations, often behind closed doors and without public knowledge or oversight. And if history has taught us anything, it’s that no matter how corrupt or negligent these financial institutions are, when the shit hits the fan they will be bailed out with YOUR money.
If you lose your private keys, you lose your money
When you first buy cryptocurrency, you are issued two keys: a public key, which works like an email address (meaning you can safely share it with others, allowing you to send or receive funds), and a private key, which is typically a string of letters and numbers (and which is not to be shared with anyone). You can think of the private key as a password that unlocks the virtual vault that holds your money. As long as you — and only you — have access to your private key, your funds are safe and can be managed anywhere in the world with an internet connection.
Even though everything is out in the open, it’s also anonymous — you don’t need to provide a name or address or any other information to use cryptocurrency.
Cryptocurrencies enable those without a bank account to be a part of the world economy. You can work and earn money and you can buy goods and services in the global market using only a computer with an internet connection. The potential for individuals to transact is limitless. The security of the Bitcoin network is clear for all to see. My response to the question of recovering your funds if you lose your private keys is the same as it would be if you lose your wallet full of cash… it’s kinda your own fault…
It’s important to remember that cryptocurrency and blockchain technology is still in its infancy and is competing with payment systems that are in some cases thousands of years old, however taking each case on its merit, doing a few google searches and comparing these new systems against the current financial systems, I believe it’s easy to see which solutions are better for the individual and the planet.
I’m Jamie, 35 years old and living in Australia. I got into cryptocurrency in 2018 shortly before the $20k high and subsequent bear market, and when you could buy 1 ETH for $300 (my first investment). Since then I have dabbled in most things crypto-related: leverage trading, minting and selling NFT’s, ICO’s… I’ve been scammed (several times), attempted various trading strategies (from hodling to 100x’ing a trade) and introduced many people to crypto.