
Bitcoin and other cryptocurrencies are useless - tombrossman
https://www.economist.com/leaders/2018/08/30/bitcoin-and-other-cryptocurrencies-are-useless
======
asenna
I'm a digital nomad and I travel around a lot. Recently I'd lost my one main
debit/ATM card, I was in Budapest and was running out of cash.

I'd never used crypto ATMs before as I never felt the need based in the states
but for the first time I looked up a BTC ATM (5 mins walk from my hostel),
transferred some BTC over from my Coinbase account, withdrew cash within 20
mins.

No Transferwise/WesternUnion, no calling up friends or family and figuring
things out. This was the smoothest way I've ever received cash in a foreign
country.

I'm not commenting about price speculation of crypto, etc. But if this
experience is possible right now, I bet there's going to be a lot more use-
cases within 5 years with actual users.

~~~
amluto
> transferred some BTC over from my Coinbase account, withdrew cash within 20
> mins.

Fascinating. Somehow the ATM network was confident that it had your BTC and
was willing to give you actual cash within 20 minutes. That suggests that
either they don't care much about security or that what you actually did had
very little to do with Bitcoin. Did you perhaps actually just convert Coinbase
value to Hungarian Forints without really involving any Bitcoin transactions?

I'm not really trying to be snarky. There may be a genuinely useful economy
based on companies like Coinbase that operate under different rules than your
usual banks, but it's not clear to me that Bitcoin per se or, for that matter,
blockchains, are an important part of this.

~~~
asenna
Here is the ATM that I used -
[https://imgur.com/bpwmBLz](https://imgur.com/bpwmBLz)

I'm pretty sure they waited for two-block confirmations instead of the usual 6
because of the risk analysis. The amount was not much and so I think that
might have something to do with it.

~~~
BenoitP
Using your Coinbase account means it didn't involve a private key belonging to
you. We don't know if the ATM network and Coinbase transacted on the
blockchain.

That's still an occurrence of Bitcoin being a transferable unit of value,
though.

We're not yet on the canonical usage of Bitcoin (that would be you using a
private key you're in control of), but we're getting there.

~~~
asenna
> Using your Coinbase account means it didn't involve a private key belonging
> to you.

True.

> We don't know if the ATM network and Coinbase transacted on the blockchain.

The action on my part on Coinbase was basically transferring / sending BTC to
an external BTC address. So the transaction was definitely on the blockchain.
But yes, I see your point.

I was also carrying my Ledger wallet but to plug it into my laptop and then
initializing the transfer while standing at the ATM was not possible. So yeah,
still getting there.

~~~
BenoitP
> The action on my part on Coinbase was basically transferring / sending BTC
> to an external BTC address

Oh, so it did involve a Bitcoin address. You're right, I don't think they
tried to find each other through metadata to settle it outside the Blockchain.
That would be dumb, plus the inconveniencing 20 minutes is consistent with
that.

It's great to see examples like this in the wild. I've been hearing lightning
is getting greater usability and traction as well. Interesting times.

------
PacifyFish
I’m no bitcoin maximalist, but boy was that a lazy write-off:

“Economists define a currency as something that can be at once a medium of
exchange, a store of value and a unit of account. Lack of adoption and loads
of volatility mean that cryptocurrencies satisfy none of those criteria... as
things stand there is little reason to think that cryptocurrencies will remain
more than an overcomplicated, untrustworthy casino.“

That bitcoin is a poor medium of exchange and unit of account is hard to argue
against at this stage of adoption. But store of value? I’m more confident in
the maintained value of Bitcoin than that of a Venezuelan Bolívar. That’s not
a strong enough reason for me to hold bitcoin, but if I lived in Venezuela it
sure as hell would be!

Moving from the realm of currency to usefulness, there’s no faster & cheaper
way to transfer money across national borders.

Viewed in this light it’s just a younger, more easily stored, more fungible,
more easily transferable gold.

Now I do hold more gold than bitcoin (in USD, combined about 6% of my
portfolio atm) because certainly risks remain. But to say it has no utility is
just crazy! I guess precious metals are useless too. What’s their market cap
again?

~~~
WtfRuSerious
Yeah, but gold is real, it's a real metal here in the physical universe, not
only does it look good, it doesn't tarnish or rust ( to any real degree under
normal circumstances ) with many niche uses beyond ornamental, just think
about how much gold foil goes into something that's going to space... it is
also one of the heaviest, most uniquely workable metals that isn’t dangerously
radioactive.

My point is that it has an INTRINSIC value, not just an arbitrary value we've
assigned to it, but a natural value that comes only to things that are
actually naturally valuable... that statement may seem to be self referential,
i.e. wet because not dry, but I think it makes the point I'm trying to get
across, which is: there's a difference between that which IS valuable, and
that which has value because WE assign it value.

Like tulips in pre-crash 1637, "bitcon" only has the value we assign to it, in
reality it's nothing but numbers and we've plenty of those.

That it can and probably will decrease in value drastically when a majority of
people realize it has no INTRINSIC value... well that should be warning enough
to those wise enough to think about critically.

It's not like "market cap" really even applies to it here, yes each "coin" is
assigned some value and the multiplication applied methodically does seem to
come up with a giant number, but there are no REAL assets... it's not like
it's a share of stock in a company that makes anything, it's all ethereal,
there's absolutely nothing of value except the fact that somebody else is
willing to exchange something of REAL value for it... when that's gone, the
whole thing will be another story on Wikipedia...

~~~
sebchris
There's a reason we call currencies like the dollar fiat currencies, because
they only have the value that we give them. Bitcoin is similarly valued. As
for gold, Bitcoin is a currency, not a rock. Have you ever tried to buy a
sandwich with gold? No, well no shit because it's not a currency and is
useless as a means of exchange. Comparing Bitcoin to gold is silly.

~~~
chrisco255
There's probably quite a few places that would take gold for a
sandwich...assuming they knew what you were giving them was real gold. Gold is
not as widespread in use as it once was for commerce, but it's still used.

~~~
WtfRuSerious
Also, the value of gold doesn't go to zero when the electricity stops...
if/when that happens the chickens laying eggs in your coop will be worth more
than bitcoin.

~~~
PacifyFish
If “the electricity stops” how do you expect to retrieve your gold?

Or do you keep it in a vault in your house along with two years’ rations in
case the world’s electricity stops working?

I don’t mean to be rude, but let’s try to keep the arguments rational. I’m
happy to be convinced otherwise about bitcoin’s value. But I need to be
_convinced_.

------
mjfl
The usefulness of cryptocurrency is not abstract: cryptocurrencies are useful
for sending value over the internet and over international borders. Doing so
without cryptocurrencies is very difficult and costly, requires large banks
and multinational law firms.

~~~
skybrian
I don't know how you define "very difficult" but plenty of immigrants are
transferring money to their families and they don't seem to be using
cryptocurrency. Western Union and similar firms seem pretty popular? This
appears to be a well-developed industry with a fair amount of competition:

[https://www.nerdwallet.com/blog/banking/best-ways-to-wire-
mo...](https://www.nerdwallet.com/blog/banking/best-ways-to-wire-money-
internationally/)

~~~
themagician
It’s difficult for criminal transactions.

There are tons of banking solutions in every country for transferring money.
But they typically have low limits and require appropriate documentation.

~~~
mjfl
It’s difficult for non-personal transactions in general. If you have a
business that delivers some digital product, it is very difficult to serve an
international client base without running afoul of anti money laundering
compliance issues at banks and such. Cryptocurrencies can get around that. And
I’m not saying there isn’t good reason for those rules for being there, but
that they are stagnant and good candidates for “disruption” provided the
attempts are made in good faith.

~~~
TheSpiceIsLife
> _very difficult_ How can this be? I’ve purchased many digital products from
> business outside my country of residence.

I usually use PayPal or Visa / MasterCard.

~~~
mjfl
But you didn’t set up the business. Whatever business was behind the
transaction either had or hired a transaction processor with a legal team
experienced with international payments like Stripe or PayPal.

And in general, they are doing something that’s very difficult.

~~~
TheSpiceIsLife
I don't understand what you are saying.

You wrote:

> If you have a business that delivers some digital product, it is very
> difficult to serve an international client base without running afoul of
> anti money laundering compliance issues at banks and such.

And yet I use a whole bunch of services not based in my country of residence
that deliver a digital product to my home. Mostly paid through either PayPal
or Via / Mastercard.

How can something be _very difficult_ yet extremely common?

Unless you mean receiving payments of large sums of money, in which case
you're going to want to engage a transaction processor and legal team anyway.
And for even larger sums of money, on an ongoing basis, it's not uncommon for
an organisation to setup a local headquarters.

And anyway, the point of anti-money laundering legislation isn't to run afoul
of such legislation, it's to decrease the likelihood a business is used by
people who have a need to launder money, and to more easily identify and track
laundered money, etc.

Or did you mean to imply that setting up a business like PayPal, Stripe, Visa,
or Mastercard isn't easy. That's probably most certainly true. You've got to
be really dedicated.

Is there something I've missed?

~~~
themagician
It’s difficuly to do outside of the US and some European countries.

Most companies will just incorporate in the US and use a US payment processor
and operate as a US company. If, for example, you have a business in Brazil
and you want to sell digital goods it’s not so easy to accept payments at all,
let alone international payments. And incorporating in the US can be a hurdle
if you don’t live here or have somone who can help you navigate getting set up
with things like a US bank account.

~~~
TheSpiceIsLife
Right. I meant to encompass this in my sentence _" And for even larger sums of
money, on an ongoing basis, it's not uncommon for an organisation to setup a
local headquarters._"

PayPal claims¹ to be _available in more than 200 countries /regions and
support 25 currencies._ Does PayPal in Brazil not accept payments from PayPal
users in The USA?

I'm not saying some people aren't underserved by money services, though.

1\. [https://www.paypal.com/en/webapps/mpp/country-
worldwide](https://www.paypal.com/en/webapps/mpp/country-worldwide)

------
tootie
James Mickens has a pretty good breakdown of why blockchain isn't a good
solution for most real-world problems:
[https://youtu.be/15RTC22Z2xI](https://youtu.be/15RTC22Z2xI)

~~~
poisonborz
Wow, that was a rather dumb presentation. Basic arguments are like "anonymous
nodes are bad because I can't sue them", "smart contracts are unneeded as we
mostly just need to store static data" (supplied by authorities), "too much
security is paranoid given real life trust with legal enforcement".

~~~
BenoitP
I believe all these would be for regular already working uses cases that
people are trying to shoehorn blockchains onto.

------
r32a_
I'm happy its been added to the list:
[https://99bitcoins.com/bitcoinobituaries/](https://99bitcoins.com/bitcoinobituaries/)

~~~
madeofpalk
Really, articles like this are good for Bitcoin.

------
dougyoung
I'm over my article limit with the Economist. If only there was a way I could
pay for a subscription without a bank account.

~~~
chrisco255
Seriously, it would be nice if someone invented a way to make
microtransactions on the internet a reality!

~~~
BenoitP
[https://brave.com/](https://brave.com/)

And btw they're currently having a BAT giveaway on the Desktop version.

I currently have my 15 giveaway BATs in it (3.37 USD), and it is supposed to
give them to site I use?

I'd give some of them to open some paywalls, but not to the economist if they
continue to write such vacuus articles.

Maybe give them to open the paywall, then be able to relinquish that payment
after having consumed it and it was of low quality.

------
FrozenVoid
The real flaws with cryptocoins(partially excluding monero and similar
projects that fix some of the flaws).

1.They're not anonymous(IP addresses are exposed). Less private than a
bank(where each transaction is not viewed by every other bank user).

2.They're not providing fungibility(unlike gold), each transaction can be
traced to source(via blockchain viewer).

3.They're requiring absurd amounts of electricity to generate(esp. Bitcoin
which consumes enough electricity to power several countries)

4.They're not fast enough for real-time transaction and real-time
finance/trade. Long confirmation times ruin potential to customer-centric
interaction.

5.Volatility of value: coins depend on the market trend dictated by big
spenders/owners who control vast majority of coins in a cryptocurrency.

6.Concentration of wealth: early adopters and cryptofarming facilities owners
hold most of wealth(see point 5).

7.Lack of security: despite being protected by blockchain, most cryptowallets
are at risk of being hacked due websites hosting them being far less secure
than banks. Lots of cryptocurrency theft doesn't inspire confidence in it.

8.Limited goods market: cryptocurrency is still not adopted enough to be a
worthwhile investment, majority of commercial use is for unregulated casinos,
illegal goods/services, and donations.

------
vidoc
They happen to be extremely useful for buying recreational drugs on the
internet. The author overlooks that.

~~~
akvadrako
Exactly - without Bitcoin or alternatives I'm not sure these marketplaces
would be feasible.

------
stockkid
> Blockchain advocates have yet to prove that the underlying technology can
> live up to the grand claims made for it.

I agree with this sentiment. Since blockchain was introduced I have seen many
people building solutions on top of it, but not many people actually using
those solutions. Instead, it seems that the most prevalent use of blockchain
technology or crypto currency is to boost the speculative wealth of their
stakeholders.

~~~
nyolfen
to me this seems like dismissing the web as a novelty in the 90s. we're in
early days yet, and still assembling the ideas and fundamental components for
what it makes possible.

~~~
acdha
By 1995, the web had clear and significant business value. Online commerce was
rolling, access to information and services was driving a big rounds of
investment at all sorts of companies, ordinary people were starting to use
things (news, forums, dating, fantasy football, etc.) on a daily basis, etc.
That was despite computers and network access being very expensive and
horrible by modern standards – remember dialup and navigating at 14.4k?

In contrast, we’re a decade into blockchain hype, adoption is far easier than
getting online was, and yet the only reason most people know about it is
ransomware, drug purchases, or speculation. The number of people who have any
need to use it on a daily basis is still a tiny fraction of the population and
only the speculators would be inconvenienced if it suddenly stopped working
tomorrow.

------
village-idiot
Pretty level headed analysis.

I'm still highly skeptical of the applications of blockchain technologies, it
seems to me that the costs and incentive structures are all kinds of wacky,
but anyone who thinks that BTC is going to become a mass-adopted currency is
just deluding themselves at this point.

------
bitlax
Strong buy signal

~~~
geofft
If I'm reading the article right, the entire claim is that Bitcoin is useless
as a day-to-day currency and is only useful for investment/speculation, so
"Time to invest" isn't actually contradicting the article at all.

~~~
rkeene2
However not all cryptocurrencies share the same issues as Bitcoin and the
article lumps them all together.

I'm a developer on a cryptocurrency called Nano whose goal is to be usable as
day-to-day money. I think we are successful to a large degree.

~~~
EthanHeilman
How do you define success?

~~~
rkeene2
There are two sides to that answer.

One is the software and technical side. The problem was a creating a scarce
digital commodity which can be securely transferred without a cooperating
central authority. I judge us successful here.

The other is the the ability to change the world. The software and ideas may
be successful, but if adoption is infeasable then we cannot succeed overall.
The project is relatively new, but the community support leads me to believe
that we are successful to a large degree here as well, relative to the ability
of any newcomer to enter the market.

~~~
TheSpiceIsLife
> day-to-day money ... ... creating a scarce digital commodity

Why would you want day-to-day money to be _scarce_?

Is not one of the benefits of cash the knowledge that you can go to an ATM and
withdraw way more than your day-to-day needs.

~~~
rkeene2
In general, you want money to be scarce so that it does not devalue wildly.
Money in Venezuela recently started lacking scarcity, to the detriment of
those who tried to use it as money.

An interesting debate that I found recently on which is the better money,
cryptocurrencies or gold-backed notes goes into this:
[https://youtu.be/q8R71WGO3qU](https://youtu.be/q8R71WGO3qU)

~~~
TheSpiceIsLife
The supply of cash notes in Venezuela wasn’t / isn’t the problem. It’s that
no-one has faith in the value of those notes.

> which is the better money, cryptocurrencies or gold-backed notes goes into
> this

This is a false dichotomy.

~~~
rkeene2
> This is a false dichotomy.

Nevertheless, it is the subject of the debate and the debate also goes into
why you would want scarcity as the basis of a money.

------
andrewflnr
I love how the subtitle flatly contradicts the actual title. What happened
there? Did some editor feel the need to damp the article's criticism but lack
the resolve to go farther than the title?

~~~
jjxw
No, there's a distinction between cryptocurrency and the underlying blockchain
technology. There are a number of applications of blockchain that are
promising such as in settling financial contracts that don't require issuing a
speculative token to go along with it.

~~~
andrewflnr
I see, I didn't read closely enough. Oops.

------
quickthrower2
Useless? Useless like Paypal or Stripe? I forgot to get the memo and I have
purchased products with great satisfaction with Bitcoin - oops.

Oh and I found the page hard to read with ads and popups, so:

[https://outline.com/yaRUTm](https://outline.com/yaRUTm)

------
bufferoverflow
I find them useful. Bitcoin maybe not as much, but Ethereum, Bitcoin Cash and
many others are great. The easiest way to pay for things without getting
screwed on the fees and silly local government controls.

~~~
prolikewh0a
>silly local government controls.

Like what?

~~~
dd36
Criminal law.

~~~
TheSpiceIsLife
Tax law too.

------
wggff
Useless ? The primary function is to protect individual wealth against central
banker meddling and corruption. My btc are up 1000x since 2011. It isn't a
smooth ride but its definitely working great.

------
enterx
By having the contracts transparent there will be much less need for public
sector.

Economist in general.

;)

------
emilfihlman
Just based on the title, since it's paywalled:

Cryptocurrencies are definitely not useless. Most of them just suffer from
pretty shitty negatives, like ridiculous distribution of ownership, ridiculous
manipulation, shitty security, infeasible settings, ... This includes pretty
much all current cryptocurrencies.

All it would take for a cryptocurrency (yes, a single per market pretty much,
crypto-(euro|dollar|...) to take hold is for the central market to push it and
be controllable by them (almost fully). The issue against that is that
international laws and treaties prevent it.

------
daviddahl
LOL. The establishment Economist magazine says it - it must be so.

------
21
The Economist used to have more thoughtful and insightful articles. This
article is about the quality you would find in a local general newspaper.

------
chrisco255
Dead tree currency's days are numbered. Crypto is a huge innovation, with
plenty of benefits over fiat. Articles like this are looking sillier and
sillier as Bitcoin et al continue to innovate, improve, scale, and defy all
critics.

~~~
grey-area
Bitcoin is not competing with paper cash, it is competing with centralized
digital currencies backed by states and huge payment networks, offering free
confirmed digital transfers in seconds around the globe. Bitcoin solves the
wrong problems in a way which guarantees it cannot scale to a global payments
system.

All currencies will be digital one day, paper money is certainly going to be
phased out, as gold coinage was, but it won't be replaced by blockchains, but
by systems which recognize trust is central to financial transactions.

~~~
TheSpiceIsLife
All national currencies, in the developed nations anyway, are already digital.

I can hold my Australian dollar as cash money, but I don’t need to.

