Bitcoin Has Become About The Payday, Not Its Potential

Cryptocurrencies aren’t a store-of-value nor safe haven for anyone’s assets. They’re experiments.

In the beginning, Bitcoin was something of a revolution to me. The digital currency represented everything from my rebellious youth.

It was a decentralized, denationalized, and digital currency operating outside the traditional banking and governmental system. It used tools of cryptography and connected buyers and sellers across national borders at minimal transaction costs.

I remember discovering Bitcoin in 2012 and sold its virtues on a regular basis. It became a main topic in my articles in German, Swiss, Canadian, and American media, was the subject of several lectures in various European cities, and I steered many private conversations in that direction, all glowing and positive.

Now, I’m bearish on Bitcoin and its digital cousins.

Instead of the future with digital currencies and the breakthrough of the Blockchain technology we were promised, we’ve just been stuck with a huge bubble and growing complications. Investor craziness. A new tulip mania, just like the speculative bubble of 17th-century Amsterdam.

The 21st-century version has welcomed a plethora of slick consultants, hazy schemes dressed up as investor possibilities, and too much wishy-washy language for anything to really make sense to anyone who wants to use a digital currency to make purchases.

It wasn’t supposed to be about price, but it’s only become about price

Early advocates of Bitcoin made certain not to tie the usefulness of Bitcoin to its price. It could evade restrictions, shed costs, and help the most vulnerable gain access to currency without middlemen. That was the sell.

The price of Bitcoin since 2011.
The price of Bitcoin since 2011.

But the reason your taxi driver, former college roommate, and Wall Street whiz kids know about Bitcoin now has nothing to do with its tech. Rather, it’s the speculation and push to be rich. Everyone wants a payday for free.

Early bets on cryptocurrencies such as Ethereum, Litecoin, Ripple, Dash, and Monero have made some very rich. The price of Bitcoin has risen more than 500 per cent in a year, Litecoin more than 1300 per cent, and Ethereum more than 2000 per cent. But that’s not the point. It was never about price and it never should be. That’s a recipe for disaster.

Cryptocurrencies aren’t a store-of-value nor safe haven for anyone’s assets. They’re experiments. They’re bets that make some people very rich, some people poor, and create barriers of entry to ordinary people who want to use the technology.

No doubt, there is innovation on the horizon and there is a huge potential for cryptocurrencies.

But merely examining the usefulness of them through the lens of price is misleading and draws attention away from the real benefits which could take root.

The ideas are there, but the technology in practice isn’t

I conducted a small experiment last year and tried to “set up” a small company on the Blockchain. It failed miserably. Online forums weren’t helpful, consultants had no answers, and I couldn’t get further than getting a digitized time stamp on a PDF.

Blockchain companies claim the new world of business will take place there, but there are no practical steps to make it happen. There are no steps yet for revolutionizing real estate, the music industry, construction, journalism, banking, and more.

Commands on a Bitcoin ATM are seen at a restaurant in Toronto, Ont., June 3, 2017.
Commands on a Bitcoin ATM are seen at a restaurant in Toronto, Ont., June 3, 2017.

Wherever there is a glut of transaction costs, the Blockchain will solve it. But even now, there is no significant practical use case. And that’s a problem.

Too many startup companies take advantage of people looking to “get rich quick” on Bitcoin and Blockchain technology. That’s why there’s speculation and the bubble in the market.

IBM and PricewaterhouseCoopers have departments dedicated to understanding Blockchain technologies in the business world. Montreal-based Blockchain firm Catallaxy was recently acquired by Raymond Chabot Grant Thornton, Quebec’s largest actuarial firm, and they’ve put together some use cases and they could lead on this topic.

But how will this evolve?

In his book Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts, programmer and author David Gerard deflates a lot of the hype, peeling the layers on the shady Initial Coin Offerings (ICOs) which have scammed thousands of investors on the Ethereum platform and more.

These have been the main vehicles for supposedly tech-savvy entrepreneurs to raise funds for their cool crypto-ventures. Again, we still haven’t seen anything significant, but there are plenty of ideas out there. And they all need money, of course.

The reason your taxi driver, former college roommate, and Wall Street whiz kids know about Bitcoin now has nothing to do with its tech.

Now we have a dubious situation.

We still haven’t achieved mass adoption and more user-friendly platforms without significant red tape and bureaucracy. Anyone who has had a cancelled account at Coinbase or MtGox can attest. And the government is always ready to shut down any new financial venture that could skim tax money from its coffers.

Where is the revolution we’re waiting for?

Maturity and prosperity

The Bitcoin scaling debate of the summer of 2017 revealed a lot of the limitations of the currency.

Transactions in Bitcoin now require higher and higher fees to pay the miners for their work. The blocks are becoming too full, transaction times too long, and confirmations take forever. The comparative advantage of Bitcoin, that being its digital use and instantaneous transactions, is no longer true.

And the worst part of all?

A customer feeds cash currency into a Bitcoin ATM located in Flat 128, a boutique in New York's West Village, on Aug. 22, 2014.
A customer feeds cash currency into a Bitcoin ATM located in Flat 128, a boutique in New York’s West Village, on Aug. 22, 2014.

People in smaller developing countries, usually ravaged with inflation, poor monetary policies, and no real financial infrastructure, are the ones that would most benefit from a truly useable cryptocurrency. The spike in mobile phone ownership across the African continent provides hope that electronic currency and transactions will work.

The question becomes then, will cryptocurrencies mature enough to provide the prosperity they are promising everyone?

There are enough good ideas out there surrounding Bitcoin and Blockchain technology and it should make us hopeful. But there are a lot of bad ones, and they deserve to be called out. Only then will the innovation we desire come to fruition.

I may be bearish, but I’m still hopeful. I’ll wait until tomorrow.

Yaël Ossowski is a Canadian journalist and activist living in Vienna. He’s currently Deputy Director at Consumer Choice Center.

Published on Huffington Post.

Yaël Ossowski is a journalist, writer, and consumer advocate. His writings and interviews have appeared in newspapers, magazines, and online outlets across the world in multiple languages. He is the founder and editor of Devolution Review and deputy director at the Consumer Choice Center. He was previously a national investigative reporter at He has a Master’s Degree in Philosophy, Politics, Economics (PPE) from the CEVRO Institute in Prague, and a Bachelor's in Political Science from Concordia University, Montreal. He currently splits his time between Vienna, Austria and Charlotte, North Carolina.
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