Bitcoin is dead. Bitcoin is dead, cry the critics. Like vultures at a funeral, financial pundits are circling. Each one is vying to print their “I told you, so”‘s before the other – fighting like starving dogs over table scraps.
Bitcoin is dead, they say again. Miner’s are shutting down. Services are running off with customer’s coins. Bitcoin is a Ponzi Scheme. The Bitcoin CEO was arrested. Bitcoin is for drugs and money laundering. The price is falling, the price is falling.
Hey… Henny Pennying is big business but I don’t picture these individuals as Chicken Littles. To me, they’re a pit of hungry vipers lashing out where ever their gut tells them.
“With Animal Farm in mind, has Bitcoin the asset’s failure thus shone a light on a system which routinely propagandises the benefits of sharing intellectual property for free while rewarding only those who live by entirely different principles?” – Isabella Kaminska, FT Alphaville
Ms. Kaminska takes a dozen more wordy paragraphs of five dollar words to say so, but the fundamental flaw in Bitcoin, she claims, is “You’re just too dumb.” Yes, really. Furthermore, she presents dubiously selected excerpts from quotes of Gavin Andresen, mistakes Bitcoin businesses for Bitcoin, and proves she does not understand the underlying technology.
Stop listening to what they say and look at what they are doing. Just as our community rallies when the price rises, so does the community of naysayers with each
bubble market correction. Our detractors are becoming a metric to gauge the popularity of Bitcoin. With each passing cycle, the numbers grow on both sides. Actually, this is good news.
Ignorance is Not Tied to the Price of a Bitcoin.
No matter how badly the critics try to frame it that way. To most critics, this technology may as well be magic. Basing their opinion on the price instead of the technology reveals their ignorance. And that is not their fault. Computer Science is a specialized, creative, field. Most users of technology choose to ignore the happenings “under the hood” of their devices and software. That should not deprive them of their opinions of the devices or software.
However, to manufacture clamorous opinions and present them to others while maintaining that ignorance is not only irresponsible but insidious – the literal pretense of knowledge and deliberate misinformation.
The critics sell themselves short. They ignore the nascent technology that grew an $8b market cap. They forget that wealth is a side effect of innovation, a creative process, and anything but finite. Bitcoin the technology is alive, well and here to stay. Bitcoin the price is just a side effect.
History Repeats… Repeats… Repeats…
Bitcoin is dead and most of us have been here before. The first few times you witness the death of Bitcoin it’s scary. You may cash out coins, you may be ridiculed by your friends, it might even keep you awake at night.
The next few times you become the evangelist. Perhaps it feels prudent to remind others “The fundamentals are sound” or “Startup money is soaring.” Enjoy the blank stares of confusion when you say, “more transactions are taking place than ever.”
By double-digits, you are a seasoned professional. This script is just part of the ride.
“Bitcoin is Dead” Anti-Venom
For example, let’s break apart an argument from the recent media blitz proclaiming “Bitcoin is dead.”
Alphaville blogger, Isabella Kaminska, exposes the “fundamental economic flaw at the heart of every cryptocurrency.”
Here are recent events she gives as indicators, before outright saying it:
“A swathe of cloud mining operators are suspending operations because they’re no longer profitable at current price/hash levels.”
The money transmitter in my old neighborhood went out of business too. Things got hard after everyone stopped using dollars. I hope GoDaddy never goes out of business. Who would register the website domains?
Cloud Mining is a service provided by a business entity completely separate from Bitcoin. Their models are, apparently, tied to the price of a bitcoin since that’s what they sell. Bitcoin is not tied to Cloud Mining. Every cloud miner could bankrupt themselves; Bitcoin would not care.
“A real-world data company is suing miner manufacturer Cointerra for delayed payments amounting to $5.4m in potential damages, and there are unconfirmed reports the company is in default to unknown senior debt holders.”
Only $5.4m? Bitcoin is dead!
So what? Butterfly Labs faced a $5m lawsuit, and they’re back in business already. BFL was the definition of fraud, customer abuse and how not to run a business. They were raided by the government, had their assets seized, were summoned to court, received death threats, the list continues.
Hey, how often are fiat banks held accountable? Maybe the government should have paid all of BFL’s debt with the consumers tax money and further propped up BFL so they could buy the competition and use their new station to do further damage before ultimately failing again.
I ask again, what does this have to do with Bitcoin? People should be allowed to spend their money on the things they want and be free to own the repercusions – good or bad.
“Sources assure us that 2-hour long block times on the blockchain are now a thing, severely undermining claims that Bitcoin is an efficient and robust payment processing alternative.”
– Sources assure me the Sun won’t rise tomorrow. The Earth will shake and the sky will turn green with lemon-yellow polka dots.
It’s not hard to say anything you want without a citation. No one knows who these sources are, Ms. Kaminska never shares them. Sources say, Bitcoin is dead.
The truth is Bitcoin is working exactly as intended. Difficulty scales up as new users join the network. It also scales back down after they leave.
There is a tiny bit of truth to this one, but it’s clear Ms. Kaminska does not understand. Every 2016 blocks (roughly fourteen days) Bitcoin self-audits. It looks back on how many blocks were mined and in what period. It makes an adjustment to difficulty and honey badgers onward.
However, if a huge portion of hash rate left, say 80%, and never returned. The network would have to make it to the next difficulty re-targetting before a return to 10-minute block times. With a significantly lowered hash rate, this would take much longer than fourteen days. So far, it’s difficult to gauge the impact, if any, of the miners shutting down.
“A company that promised to double your bitcoins in just 100 hours with sophisticated marketing like this… has surprisingly failed to deliver those bitcoins. With no-one as yet figuring out that the desperate short-term nature of this scam probably represents the fact that those in the know realise and appreciate that the golden goose is about to die, so are rinsing the system while they can.”
You’re telling me consumers are making bad decisions with their money? Well, good thing fiat dollars make that impossible. No one has ever been conned out of their good ‘ole USD. Regardless, it’s none of your business what risks people take in their investments. If I ran the competition, The Federal Reserve, I would be ashamed that people were fleeing my currency in droves for a chance to make mistakes like these.
Her golden goose comments will make sense soon. It ties in with the “You’re too stupid” for Bitcoin to work argument.
“High quality[sic] global journalism requires investment.”
Is the note that precedes the copy & paste text from Alphaville’s website. Behold, high-quality journalism:
“Bitcoin’s unofficial CEO Gavin Andresen has publicly declared he is cashing out of Bitcoin and investing in stocks,” – Isabella Kaminska, Alphaville
“Bitcoin is wild and crazy investment that I’m diversifying out of all the time,” he says. “If bitcoin is wildly successful, I’m still holding on to a good chunk of bitcoin. It could be worth tens of millions of dollars, but it could be worth zero. It doesn’t make sense to hold more than that amount. I don’t have a desire to be a multi-billionaire. That’s not what motivates me, I have no desire to be filthy rich.” – Gavin Andresen, Chief Scientist, The Bitcoin Foundation
Give me a break. Using a quote and not providing a full citation is a hack. Oh, but it gives great link back to other “Bitcoin is Dead” sensationalism. “Millionaire with thousands of bitcoins diversifies his portfolio” just doesn’t sound as good as “Bitcoin CEO is publicly cashing out of Bitcoin.” That’s manufactured hype.
People are Too Dumb. So Defer to a Government Made of People
Isabella goes on, making six points she believes are positive.
1) Turns out, if you want people to learn about finance and cryptography, it’s darn useful to offer them a financial incentive to do so. (In the real world, that incentive is usually the prospect of getting a good job.)
2) Based on point 1) there are going to be a lot more individuals who know a hefty amount about finance and the strengths of a well managed fiat currency from this experiment. That said, as with any university course, there are still going to be a lot of people on whom the lessons were wasted, and who will undoubtedly have to retake the course in another guise, eventually.
3) An education scheme funded by its users naturally distributes capital to those who understand how the system works (the winners) and away from those who don’t (the losers). If the losers don’t use this experience as a life lesson their money will have been badly spent. One might argue, the winners presumably already had the skills in the first place, and are the equivalent of the teachers/masters who deserve to be rewarded for imparting their knowledge. Nevertheless, it’s still the case that if Biff Tannen’s version of 1985 had an education system, it would probably have looked like this.
Real life naturally rewards its users based on who understands how the system works (winners) and those who don’t (losers). Pssst – Biff Tannen relied on theft, coercion and deception. He was a statist. Bitcoin is voluntary, impartial and transparent. Bitcoin is anarchic.
Isabella has a problem with you going out in the world, learning more than other people, applying it in useful ways and profiting. She assumes that the majority of us will be the biggest idiots left holding the bag. When the price finally plunges below a penny, we will return to fiat with our tail between our legs. The only value we can provide at that point is contributing the knowledge we picked up from Bitcoin to the fiat system.
Also read: Bitcoin Price and the Federal Reserve
5) Bitcoin illustrates beautifully that it’s the country and/or civil society system which puts the value into currency, not the currency which puts the value into the system. On that basis, we learn that any system that is resource dependent, badly managed, unproductive and sustains itself only by offering safe harbour to criminals and tax dodgers is unlikely to be sustainable. Apply that logic to Bitcoin, and you quickly realise, if Bitcoin was a country it would be probably be a failed state
An overpowering organization that forces everyone at gunpoint to move at the pace of the lowest common denominator is a great reason to become a criminal. Good people don’t follow bad laws.
How convenient that anyone trying to keep the entirety of what they earn are criminals. What Bitcoin offers is the same appeal that pulled people to The New World, The American West – The opportunity to make your own way, work with others to solve your problems, privacy and property.
The trail to every great frontier is blazed by those seeking freedom from the current establishment. How dangerous are these criminals who peacefully trade with one-another and then refuse to give a portion to third parties that demand it. Does it make someone a criminal if they rather their earnings go towards their family than a foreign war that destroys foreign families?
When did it become a sin for me to want to keep what is mine and a virtue for you to covet what you do not have?
“6) With all that in mind, we suggest the true economic benefit of Bitcoin may be its unwitting exposure of the hypocrisy of so-called “revolutionary” open-source systems. All they’ve really allowed us to do is replace old fashioned rubber and oil barons with tech barons happy to exploit the nameless coding workhorses contributing to open source projects for their proprietary business benefit, just as the former exploited natural resources and human labour. The only difference this time, perhaps, is that plantation workers at least knew they were being exploited. But those workhorse programers have been persuaded code for free in the name of the greater good. This makes the latter more akin to the soviet experiment than old-fashioned ruthless capitalism.”
I told you earlier Ms. Kaminska thinks we’re all too stupid to use Bitcoin and that is why Bitcoin is dead. Well, This has been a long article, but Bitcoin doesn’t care. Here, in her own words, we are all idiots and Bitcoin is dead.
As ever, even in the cyber age, we therefore find ourselves at the mercy of same old suspects: “the good” (the legal government systems that supposedly defend our interests or in some cases doesn’t) “the bad” (organised private mercenary operations who have the loyalty of those who can defend our interests but which demand protection rents from us weaker common folk) and “the ugly” (malevolent predators who just want to mess with the system and/or survive by preying on the weak, and who the bad claim to defend us from.)
If that’s the case, the above is a true reflection of anacyclosis at work. It also suggests the only way society can truly preserve the stability and technological advances achieved by collaborative processes is by all of us mastering the techniques that can help defend us from the predators and destabilisers who understand how easy it is to cheat the system.
And that, we dare say, amounts to a population-wide IT/encryption literacy campaign. Which, by definition, is a multi-generational project which will be unlikely to reap returns within the next business cycle, let alone overnight. – Isabella Kaminska, FT Alphaville.
Bitcoin is not for bootlickers or luddites comfortable with doing as they are told. On that, I completely agree with Ms. Kaminska and hope that she maintains a bailiwick far from cryptocurrency for some time to come.
Images from HastyDiatribe/Photobucket and Shutterstock.