The time has come to stop tolerating Bitcoin
22-Apr-2021 •Dhirendra Kumar
Amidst the dire pandemic news, one parallel story that has been running is that of Bitcoin. The pandemic has been good for the price of Bitcoin, and Bitcoin mania is on a roll. On April 14, an American cryptocurrency exchange named Coinbase Global had its IPO. After the usual day-one stories of employees and founders having made gigantic fortunes, the stock has had a less than stellar time.
However, the Bitcoin mention in the news that attracted my attention was something I read on, of all places, ESPN Cricinfo. The anti-corruption unit of the ICC released the details of its investigation into the conduct of the former Zimbabwe captain Heath Streak and, as you may have guessed by now, Bitcoin played a role in the story. One Mr Aggarwal from Delhi, whom the ICC report quaintly refers to as a 'corrupter', paid Streak two Bitcoins in exchange for information that could be used for betting. Streak later sold the Bitcoins for $35,000. Apart from his other problems, I'm sure Streak has the same regret that any trader who sells early - those two Bitcoins would now be worth more than three times that amount.
The other non-financial news in which one regularly sees Bitcoin mentioned is about ransomware hacks. One day someone - a company or an individual - finds all the files on their computers encrypted. There's a ransom note on the screen that gives instructions on how to pay someone in Bitcoin to get your files back. Apparently, most victims pay. I'm sure that there are many ransomware criminals in the world who have regrets similar to Mr Streak's but the mechanism works.
Even though I have always been a Bitcoin sceptic, I must admit that it fits the requirements of Mr Aggarwal, Mr Streak and the anonymous ransomware people well. They must be thankful that Bitcoin has been invented so that they can conduct their business in a safer and more convenient way. If it weren't for the practical application demonstrated by these people, I would have had to say that Bitcoin is a completely useless, purely speculative vehicle with no practical use whatsoever.
There are many financial schemes or ideas about which their supporters and detractors have opposite views. For example, if someone says that this teak plantation or emu farming venture will give good returns, then someone else might say that no, it's a fraud and the money will disappear. Those are diametrically opposite views. Bitcoin is not like this. The fans and the sceptics agree on the basic characteristics. According to the fans (or Bitcoin quarterbrains, as Nassem Taleb calls them), Bitcoin is great because it's a currency that is not controlled by any central bank or government, it allows anonymous and untraceable transactions, and anyone can create Bitcoin using a simple technological process. According to the opposite camp, Bitcoin is an awful idea because of these very same reasons! That's actually not an agreement but a deep disagreement.
Bitmaniacs express surprise and disappointment that many governments are hostile to Bitcoin. Actually, hostility to cryptocurrencies is the only logical position for any government to take. Every government in the world would want to be in control of its own currency and its own monetary environment. Countries that cannot do that have a much harder time economically. For example, whenever people lose faith in a currency, they shift assets to some other currency. Every Indian above a certain age remembers when this was routine in India. For the same thing to happen but vis-a-vis a currency magicked out of thin air by shadowy 'mining cabals' is a far worse fate.
On top of all this is the absolutely ridiculous and ever-increasing electricity consumption of the mining process, which is an inherent feature of Bitcoin. A recent estimate from a University of Cambridge study shows that Bitcoin consumes more than 178 terawatt hours annually, which is more than all but 30 countries in the world. On the one hand, we hear nonstop talk of carbon footprints and climate emergency, and on the other hand, an absolute gargantuan amount of energy is being wasted to create this funny money which has no use except blind speculation and a medium of exchange for criminals.
There have been rumours recently that the GOI may come down on cryptocurrencies heavily, banning all possession by Indian citizens. Obviously, there are other priorities at this time but hopefully it will eventually do so, something that might encourage other governments around the world to put an end to this bizarre planet-incinerating scheme.