Cryptocurrency/Is a Scam

Cryptocurrency: A Scam or the Future of Finance?

Well, duh. If you're not having crypto assets, HFSP.

I'm writing this post after I completed watching a video called 'The Great Crypto Scam' by a creator who goes by the name of James Jani. The video has amassed 655k views in just 4 days. Jani did bring up very valid points about the 'cryptocurrency industry' and the shady promises that cryptocurrency founders make. However, his interpretation of Bitcoin was full of assumptions that to the average person seem like undoubtable facts. I have been studying Bitcoin for a couple of years now and I wanted to take a shot at writing responses to some quotes made in the video.

The timestamps in which I will refer are from 6:38 to 16:16.

It just so happened that the more people started buying into the message, the more Bitcoin's value rose, and the more people were willing the put real dollars into buying Bitcoins.

I will not sugarcoat it - the majority of people who are buying Bitcoin or other cryptocurrencies in our world today (and especially the past 2 years) are looking to get rich quick. They most likely heard something from a friend or someone on Tiktok about how if you just 'buy XXX because its going to the moon!'. Nonetheless, there are some people who hear about Bitcoin and it immediately sparks their curiosity. They spend hours upon hours trying to learn about how Bitcoin operates, how it is different than previous forms of money, and why people people would spend so many 'real dollars' into it. The value of Bitcoin is purely based on the public and as more and more people learn about it and decide to adopt it as their treasury reserve asset, it is no surprise to see growth in value.

Bitcoin started drawing attention from places it probably wasn't expecting or even wanting; the guys in suits. Ya know, the people with big money. The people who saw Bitcoin was revolutionary but also as an opportunity.

Bitcoin is code. It has no wants or expectations. The beauty of a permission less money is that you have just as much of a right to use it as your enemy does. Did Satoshi foresee a world where 'guys in suits' were using Bitcoin? Maybe? I mean, he did say that in the future he expects there to either be no transactions or tons of transactions so he kind of expected it. There are definitely still a lot of people with 'big money' who view Bitcoin as an investment opportunity but how an individual chooses to view and interact with Bitcoin is up to them... what do I care?

Bitcoin was doomed from the start. That's what a lot of crypto skeptics will tell you and I understand why. Relying on computer code and the ideas of tech anarchists probably isn't the best place to entrust a reimagining of the financial system. Bitcoin has a maximum supply of 21,000,000 which makes it deflationary by nature. So if 1 Bitcoin is worth more tomorrow than it is today, why would you want to use it to transact with? It's a pretty bad incentive to have if you're trying to make a global currency.

The financial system already relies heavily on computer code. Banks performing ACHs or quants writing trading scripts for hedge funds is nothing new in todays world. It seems fair to me to say that Bitcoin emerged from the idea of 'tech anarchists' because the only people who were heavily involved in Bitcoin in the early days were tech savvy and contributed to a monetary system designed to undermine government power. Yet, I don't think that it is wise to say an idea isn't good or worth exploring because of the person it came from.

The argument pertaining to Bitcoin's deflationary nature will vary from person to person. I will say that this was done on purpose so that the proportion of Bitcoin held by a user to the total supply is constant with time. This is different than dollars because inflation means that the proportion of dollars held by a user to total dollars is always decreasing. In the latter, you are getting a smaller piece of the pie. In a world where the global reserve currency is supply capped, people in the system are actually able to know that their savings will not be devalued over time without trusting anyone. I find the argument of 'why would you want to use Bitcoin if it just appreciates in value' to be quite comical. The reality is that we are forced to live in the present and simply cannot afford to always save for our future. It would be great if I could save my entire paycheck, but I need to eat, have a place to live, fill my car, get a gym membership, etc. Even if I do not wish to, I still need to consume in the present if I want to have some joy and meaning in life. Personally, I think that a currency that is constantly inflating away value pushes people towards consumerism. A a currency with finite supply encourages people to be more frugal. Our Keynesian economic system glorifies spending in the economy. It is how we measure the success of our country, by how much people spend. Why not measure it by the amount of wealth, not debt?

But that is already assuming that Bitcoin had the technical capabilities to become this worldwide currency... which it didn't. I mean, Bitcoin had scaling issues thanks to design decisions that Nakamoto had made. You could only process 7 transactions per second while VISA can process 1,700 and Mastercard can process 5,000

Satoshi's decisions to make blocks 1 MB and ~10 minutes in between blocks was a deliberate decision for 2 reasons: 1. The size of each block was decided so that it was possible for anyone could store the entire copy of the Bitcoin blockchain without the use of massive storage capabilities and 2. The 10 minutes in between blocks allows plenty of time for nodes running Bitcoin core network to receive block information, validate it, and add it to the chain. Centralization is 100% better than Bitcoin when it comes to processing transactions and it is much more convenient for the user. However, centralized parties are subject to corruption and lying. There are centralized platforms that exist within the Bitcoin ecosystem (exchanges, Cashapp, Strike, etc.) that allow you to send Bitcoin to other users of the app instantaneously for no fee. The only catch is that you are subjecting yourself to the 3rd party risk of the exchange.

I view scalability in 2 ways. The first is that people will be able to hold a majority of their wealth in their Bitcoin private key where it faces zero counter party risk. Think of this like your digital vault that only you can get into. Periodically, people can load Bitcoin into their exchange account and use that to transact with people. Think of this like a wallet you would carry around with you day to day. If your wallet gets stolen it obviously stinks, but it is not the end of the world because you don't store the majority of your wealth there. I know that this comment will frustrate some people because the whole point of Bitcoin is to bypass central authority and even I personally don't like this idea. But I like this a lot more than having a third party process my transactions AND entrust a third parties to store my value. The second way scalability can resolve itself is by implementing layered solutions on top of the base layer blockchain such as the Lightning Network. However, I will admit that I have not dug too deep into the Lightning Network to talk about it with confidence so I will not comment further.

Keeping the Bitcoin network running wasted a lot of energy. Bitcoin aimed to be decentralized meaning no government or central entity had control over it. But in order to do that, Nakamoto employed what is called a proof-of-work consensus model. All this meant that computers on the Bitcoin network would be forced to use real world energy to solve algorithmic problems and whichever computer solved it first would be rewarded with more Bitcoins. It was a process called mining and that process is insanely wasteful of energy.

In short, Nakamoto's proof-of-work model was designed to reward people who were acting in the best interest of the network and punish those who attempt any sort of mischief. I find the phrase 'wasted a lot of energy' to be disingenuous. I do not believe that energy intensive and wasted energy are two in the same. I think of wasted energy to be energy that is being used but not providing any value like a faucet left running or a lightbulb left on a room with no one in it. On the other hand, energy intensive refers to an invention with a 'large energy consumption'. Why would anyone drive an automobile? It wastes more energy than just walking. Or why use a hair dryer? Why use a washing machine? Why use central heating and cooling? Is watching pornography a good use or waste of energy? The answer is that all of the inventions and ideas have the ability to provide users value at the cost of higher energy demand. Do we really need any of those? Probably not. But the people who use them choose to use their energy on them and if someone believes they are receiving value from using that energy and they are not harming anyone, who am I to tell them how to use their energy? People who mine Bitcoin find it valuable to use their energy to help secure the Bitcoin network as well as earn Bitcoin themselves. Calling it a waste of energy is just an opinion and it is up to you to decide if it is or isn't. I could go on and on about this but this post is going to be quite lengthy so I will leave it with inventions, processes, or networks that are energy intensive are not intrinsically bad.

Bitcoin, for the most part, failed in its objective of trying to a global currency. Outside of illegal use purposes, Bitcoin just wasn't being used to transact with.

The interesting thing about exponential adoption is that it moves so slowly through time until one day it is just normal and society questions what life was like without it. I find it naïve to immediately write Bitcoin off on its mission of becoming a global currency. We are only approaching halvening 4 of 32, the number of Bitcoin ATMs is increasing every year, the hash rate of the network is hitting all time highs, the number of addresses containing any amount of BTC is increasing exponentially, countries have actually started to adopt Bitcoin as a form of money, and we are in the midst of inflationary highs. Bitcoin still has a long way to go, but I have yet to find any concrete arguments as to why it failed as a global currency other than saying it's volatile or the price in dollars has gone down.

I'm not really sure how evident the data is for illegal use purposes containing Bitcoin transactions. All I can think of is how dumb you would have to be for committing crimes in Bitcoin versus physical dollars. A Bitcoin transaction is permanently added to the blockchain never to be removed. If you were transacting over something illegal, the evidence for the transaction taking place is publicly available 100% of the time. On the contrast, dollars can exchange hands in a private room and the transaction may forever be a thing of the past. If I were a criminal, dollars would definitely be my preferred way of doing business. I recently listened to some podcasts by a creator named 'Darknet Diaries' where they did a deep dive into CIA investigations on people committing cyber crimes and finding out who they are because of Bitcoin. This lead to hundreds of arrests around the world of people committing crimes I don't even feel comfortable talking about. Whatever you decide to post on the blockchain exists forever; that data will always exist inside of a block on the longest chain. That goes for everyone. The rich, the poor, and all of us.

The Bitcoin that we see today is a shell of its former identity. Most of the purchases of Bitcoin today occur on centralized exchanges that have to comply with the law of centralized institutions. In the instances where you have heard about Bitcoin, or if you have ever been encouraged to buy Bitcoin, under what context is that always framed? Satoshi Nakamoto left in 2014 and has not been heard from since. What was left of his project was not a currency, it was something entirely different.

The Bitcoin protocol in place under Satoshi on January 3rd, 2009 is still the same as today except for some Bitcoin Improvement Proposals (BIPs) that have been proposed and widely accepted by the network to improve the existing infrastructure. BIPs are important because as time goes on, more people are finding interesting improvements to make the network stronger (see BIP 39). BIPs are all consensus based so if over 51% of the network agrees on a change, it will happen. It is just code at the end of the day.

I'm not sure where the backing for 'Bitcoin is something entirely different than a currency' and 'Bitcoin is a shell of its former identity' came from. Maybe Jani is referring to the fact that centralized exchanges and laws from regulators like the SEC exist? The way I look at it, Bitcoin's growth made it inevitable. Companies capitalize to sell Bitcoin at a fee and now that there is so much push for a Bitcoin ETF, lawmakers are trying to step in and regulate Bitcoin. That doesn't mean that the code surrounding Bitcoin was hindered or changed. It just means that the way society is interacting with Bitcoin is changing. Slowly and slowly starting to become more integrated.

When Jani said 'Under what context is that always framed' I had to think a bit more abut that. Is he referring to people promising that Bitcoin will go up in value and make them rich? Those people have no idea what they are talking about. No one knows what Bitcoin is going to look like in the future. It could collapse in some unforeseen black swan event. Who knows? But when it comes to the confidence of storing wealth, I choose Bitcoin every time. Why? I am much more confidence in the worlds biggest network of computers to protect the Bitcoin network and keep it alive for the next 100 years than the confidence I have in big banks who have a track record of manipulation and greed. Also, whenever I have been encouraged in the cryptocurrency space, it is usually by someone pushing an altcoin who pitches the idea that their token 'does XYZ soooo much better than Bitcoin'.

You realize that most of the people who are buying Bitcoin are not using it as a currency. They are buying it as an investment. And therein lies the contradiction. Because the more people who are using Bitcoin as an investment the less liable Bitcoin became as a currency - the very thing it is being pitched as being revolutionary as. So, you know what you end up with right? *plays clip of someone saying Bitcoin is a get rich quick scheme* Anyone who buys into the idea of Bitcoin is doing so to sell it at a higher price at a future date and the people who buy that Bitcoin are also looking to sell it at a higher price at a future date. The only way to make money from your Bitcoin investment is to use money from new investors.

This is... quite the claim. Let me just start off by saying that stating 'anyone who buys into the idea of Bitcoin is doing so to sell it at a higher price at a future date' is foolish and ignorant. I am ,and have personally spoken to people who are, under the belief that we are never converting our Bitcoin back to dollars. Bitcoin is only to hold and spend for the rest of my life. Like I mentioned earlier, there are a significant amount of people who view Bitcoin as an investment or get rich quick. That doesn't mean that people like myself do not exist. And the number of people who are in the same boat as me are increasing every single day. People who think Bitcoin is a ponzi scheme hold the idea that I will be left holding the bag. They don't understand that holding the Bitcoin bag is legitimately my goal! Insinuating that Bitcoin is a ponzi scheme is almost comical. There is no figure head at the top of Bitcoin selling the promises of Bitcoin down to the masses. Satoshi knew that for his idea to work and take off, he could not be present in the ecosystem. He knew Bitcoin must be a kingdom without kings and so he vanished. The coins he mined never even touched. Considering that was worth upwards of 60 billion USD at one point, I find that pretty phenomenal. That is why I never waste my time with altcoins. They are all missing two key properties: not having a figurehead/team behind the project and they all used a pre-mine to mine their money. The Bitcoin that Satoshi mined he did so by the rules of the blockchain (see more information on genesis block)

The rest of the video regarding Bitcoin talks about how it is a decentralized ponzi scheme (wtf?) and then transitions into cryptocurrencies that use blockchain. I have a feeling the length of this post will turn many people off to reading it. It is a strange phenomena to me that people view content so often without questioning what they are being told but people believe whatever they want to believe (including myself). If you have made it this far, thank you for reading what I had to say about Bitcoin. If you have any questions, comments, or don't agree with something I mentioned, please let me know. I am always looking to hear more perspectives and learn because it helps me build my ethos. If you think anything I said is inaccurate, please also let me know. I did a majority of this just off the top of my head because I wanted to pretend that it was a debate for practice. Thank you.

• Crypto Scam Video Response: Summarized & Yoinked from this reddit post author addresses a video titled ‘The Great Crypto Scam,’ countering points made about Bitcoin with personal insights and arguments.
• Bitcoin’s Value and Adoption: Discussion on Bitcoin’s value being public-driven, its adoption by ‘guys in suits,’ and the currency’s deflationary nature.
• Technical Capabilities: The author debates Bitcoin’s technical limitations, such as transaction processing capacity, and discusses scalability solutions like the Lightning Network.
• Energy Consumption: The energy usage of Bitcoin mining is defended, contrasting ‘wasted’ with ‘energy-intensive’ and comparing it to other energy-consuming activities.

The author concludes by reflecting on Bitcoin’s journey and its potential as a global currency, inviting further discussion and learning.

In the digital age, cryptocurrency has emerged as a polarizing topic. Is it the future of finance or the latest in a long line of scams? This article delves into the heart of the debate.

The Case for Cryptocurrency: Cryptocurrencies, like Bitcoin and Ethereum, have been lauded for their potential to democratize finance. Unlike fiat money, which is subject to inflation and government control, cryptocurrencies offer a decentralized alternative. The argument goes that by holding crypto, you’re investing in an asset that, like gold, has the potential to appreciate over time rather than depreciate like your car or that fiat currency the fed's been printing nonstop.

The Skeptic’s View: Critics argue that the volatile nature of cryptocurrencies makes them an unreliable store of value. They point to the dramatic price swings and the potential for market manipulation as indicators that crypto is not a safe haven but a speculative bubble.

Holding vs. Fiat: A Financial Dilemma: The depreciation of fiat money is a well-documented phenomenon, with inflation eroding your purchasing power over time. In contrast, cryptocurrencies have shown a remarkable ability to not only maintain value but also to increase it significantly, albeit with periods of intense volatility.

Provoking Thought: As we navigate the complexities of this new financial landscape, we must ask ourselves:

• Can cryptocurrencies truly replace fiat money as a stable and reliable form of currency?
• Is the risk associated with crypto investment worth the potential reward?
• How will the integration of cryptocurrencies change the global economic structure?

In conclusion, whether cryptocurrency is a scam or the future of finance is a question that only time can answer definitively. What is clear, however, is that the decision to hold or not to hold crypto is more than a financial choice; it’s a bet on the future of money itself. As Binance’s CZ famously said, “If you can’t hold, you will not be rich.” But perhaps the real question is, what does it mean to be rich in a world where the very nature of money is evolving?