Yesterday, I posted a long list of Bitcoin Pros, and hope that I presented some worthy reasons why Bitcoin and Cryptocurrencies are not only here to stay, but have real value.
Today, I will go through the opposite list. There are reasons why I have not dived from 50 feet on high into the Cryptoverse. And why Crypto may in fact have no real value at all.
Please feel to read, comment, support, criticize, and above all educate me! Always trying to learn.
Bitcoin Cons
An insane number of scams
This should be #1 on anybody’s list. Until some basic governance takes hold, Crypto is not a safe haven for anyone.
Coinbase and other brokerage exchanges are taking valuable steps forward. But it’s not enough. Brokerages get hacked. Cookies get hacked. Funds are not FDIC insured. Look at Poly, or Liquid. Stolen funds are usually not recovered.
Many US states block Binance, and other exchanges, so consumers have limited options. Most crypto wallets are not on one of the brokerage services, making them more vulnerable. New York State blocks more exchanges than anybody else, and is in my opinion making the landscape riskier rather than safer.
Every Discord channel is chock full of scammer private messages, to the point where mods auto-post every 10 minutes to beware scammers. If you happen to give your secret passphrase, your wallet will be fully cleaned out within 5 minutes.
If you are going to get into crypto, and if I am going to get into crypto, a massive learning curve is required for each person, around security alone, to not wake up one morning and find your life savings balances have unexpectedly gone to $0.
Wallets get lost, and transactions are misdirected, with no recourse
https://www.businessinsider.com/man-offers-council-70-million-dig-up-bitcoin-hard-drive-2021-1
Every wallet has a secret recovery phrase. If you lose this phrase, and get locked out of your computer, your wallet is lost for good. You can’t store this phrase on Gmail, because Gmail gets hacked (ESPECIALLY by Crypto wallet thiefs).
If you get a hardware wallet, considered the most secure, and lose your hardware wallet, you’re SOL — and not Solana.
If you send your hard-earned crypto to a wrong address, your money is gone. There is no way to contact the new wallet owner, let alone get your money back.
Imagine driving unknown roads, in the dark, at high speed, with no seat belt or air bag. That’s the world of crypto.
What you don’t know, WILL cost you.
Central banks could join and ban decentralized crypto
If the United States, European Union, China, and Russia were to join forces, they could squash crypto. They could relegate it to the dark web only, where it would be worth a fraction of today’s levels.
In its place, would be CBDC’s — Central Bank Digital Currencies. The only possible thing more Big Brother than CBDC is injecting RFID nanobots into our bodies to monitor our whereabouts and actions. CBDC’s will enable central governments to monitor EVERYTHING you do. Oops, you donated to Donald Trump’s opponent? ZAP, now you’re poor. It can happen.
There are reasons why a global crypto ban is unlikely:
- I do not see world governments working together to make this happen. I don’t see Russia cooperating with “digital extradition requests” from the United States. I don’t see US and EU supplying China with information about citizens — or vice versa.
- The sheer amount of digital totalitarianism required, including banning VPNs, companies holding crypto on their balance books, and jailing crypto developers, is more than I think any government, or coalition of governments, is capable of sustaining.
- Innovation is always two steps ahead of government. Look at how fast Chinese people adopted dy/dx, less than 48 hours after China banned crypto transactions.
But even if Crypto is not outright banned, I do see Governments sabotaging crypto usage. Transaction reporting is already in the works. Accredited Investor requirements could shut out everyday people. Nonsensical taxes could drive crypto underground or offshore. Regulatory compliance costs massive amounts from companies, who then pass costs on to consumers.
The internet grew as it did, because regulatory restrictions let the tech industry govern itself for as long as possible. Governments do not appear to be as lenient with crypto. This is a risk.
Fees are crazy
This is supposed to be fixed…any…month…now.
A single recent Ethereum transaction cost $23.7 Million in fees, for a $100,000 trade. The fee was (generously) returned by the miner, but the news was not entirely shocking.
Even simple transactions, for $2,000, cost up to $500 in transaction fees / gas charges.
I have heard several stories of kids trying to get into NFT markets, only to be paying so much in fees that even when their NFT trades were profitable, after fees they net lost money.
Exchanges such as Coinbase typically charge between 0.5%-1.5% of your transaction value, for both buying and selling. So, if you buy $10,000 worth of Crypto, the exchange will take $50-$150 both coming in and going out. I suppose this is not too bad. But I much prefer the flat $7 trades that ScotTrade used to offer (once upon a time…).
Ethereum 2.0 is on its way, and exchanges are increasingly competing with each other. I expect fees to go down with time. But for now, high fees & reduced gains are a barrier of entry.
There is a serious lack of real world use cases
Blockchain was going to change the world, back in 2017. Applications in development included wills, charitable donations, and I even read a story about a Crypto payment dog walking service.
What has changed since 2017, in terms of business use cases? Honestly, not much.
The business potential is the same. But enterprises have not adopted blockchain to support their operations. I thought the #1 use case for business adoption, was going to be supply chains: tracking palettes, even individual products, as they are shipped from A to Z. USPS/UPS/FedEx package tracking, inventory management, supplier/vendor auditing, etc. But large supply companies are not updating their infrastructures to be based on blockchain.
Even crypto games today look like Flash animations from Kongregate.com 15 years ago. And coins supporting these games have multi-billion valuations? I don’t see Roblox, Fortnite, Minecraft, or League of Legends announcing crypto adoption. It should be much easier to integrate crypto purchases into existing games, than create brand new games specifically around crypto. Why haven’t any premiere games added this only moderately complex feature?
At the recent Mainnet in New York City, “adoption” was the biggest hole that crypto visionaries on stage acknowledged. I would agree with this 100%, and until blockchain becomes easier to adopt, I don’t see Crypto fully going mainstream.
Lack of adoption is also related to my next point:
There is a serious lack of development talent
I’m in tech and so I meet people about this. Code in blockchain is often MVP-level maturity. Developers already have $millions in coins, so what incentive do they have to fix or improve things.
New developers are not onboarding fast enough. You can still post “Hey I’m a Python developer” on Twitter, and Crypto FOUNDERS will DM you asking to talk.
Unfortunately, Crypto salaries are not very high, because the payout is in coins. Of the tens of thousands of crypto projects in development, very few will hit the jackpot.
Becoming a crypto developer is risky. And the rest of IT is starving enough for talent, that a mid-level developer can easily make $200,000 per year if they moderately exert themselves.
Crypto pumpers are worse than Gamestop pumpers
…or AMC pumpers. Look at Twitter. Look at YouTube. Look at Medium!
I used to follow Yahoo stock message boards. Any time a stock rose to bubble levels, Zombie trolls would rise from their graves, and post predictions of 50% gains coming in the next week. Crypto pumpers have taken this Zombification, one step worse.
Even legitimate coins, let’s say Bitcoin and Ethereum, are pumped — and dumped. Again, look at YouTube. There is so much competition among bloggers, vloggers, Twitter handles, and TikTokers, that you need a following to be heard, and you need LOUD headlines to attract a following.
Much of this point is general cynicism towards today’s emphasis on noise as a path to success, which is a problem far beyond crypto. But even for legitimate tokens…
Don’t believe the Hype!
For every Elon Musk with a famous name, there are 10,000 shitcoin pumping whales who know exactly how to manipulate markets from anonymity. Which leads me to my next point:
Markets are manipulated by those who won’t get caught
…and who know they won’t get caught.
Squid Games coin ironically became a representation of the popular TV show. The coin held for a long time at $2.80 per coin. In a matter of minutes, it shot up past $2,800, a 1,000x increase. Then founders sold, and minutes later it was trading at 40 cents.
This coin had no relationship with the TV show. This coin’s founders were anonymous. Certain people tried to post online that it looked like a scam. And yet people lost their life savings.
Market manipulation is nothing new. In physical markets, the price of Silver has been manipulated more than once. The Hunt Brothers in 1980, and J.P. Morgan in 2020, both acknowledged their actions.
But the world of Crypto has no safeguards to discourage manipulation. Thus, the world of Crypto is rife with it. Examples are so abundant, I won’t even try to list them.
Meme coins are shit
Here’s looking at you, Doge.
Dogecoin was started as a joke, to make fun of the absolute mania around crypto. Look at its slogan:
“wow much coin how money so crypto plz mine v rich very currency”
Fine, the Doge culture developed a bit of personality. The Doge dog is cute. The gif’s are creative. And, Doge is dogshit.
There are others: Shiba Inu, Baby Doge, Dog Coin, Cat Coin, Cate Coin, Goat Coin, Shih Tzu, ElonDoge, MetaDoge, Dogelon Mars, etc.
There is an entire section on CoinGecko called “Meme Tokens.” As of this writing, Meme Tokens have over $70B total valuation.
Then there are NSFW coin names, which somehow manage to pop up in wallets, unannounced but free.
The problem with Meme coins is they have no real value. Meme coins DO live down to Warren Buffett’s assessment.
You would honestly be better taking whatever money you are considering “investing” in Meme coins, going to your local Casino, and gambling it on Baccarat dealer, Roulette red or black on a wheel with only one green, or Craps pass with odds. At least your odds of winning are close to even, and the market won’t be manipulated by professional market-watchers who know how to exploit naive psychology.
Concentrated mining could lead to 51% doctoring the books
Now we get into areas that I less know what I am talking about.
As mining companies get bigger, fewer, and M&A consolidated, and as transactions decrease in frequency (if Bitcoin will be mostly HODLed), there exists a possibility that a 51% majority of miners could conspire to cook the books.
Executing a BIG move would bring Bitcoin, or any other Coin, down to $0 at once, as holders would flee for other cryptocurrencies. But micro-adjustments are less likely to get caught. Let’s give ourselves a small fraction of Satoshi Nakamoto’s lost 1-million Bitcoin wallet, and then again in 45 days, etc. Let’s cannibalize one of the many lost wallets for ourselves. Etc.
Again, I am not even sure this is a valid risk. But if it is possible, then Crypto does in fact have zero backing of integrity and merit.
Any global power outage will instantly reduce Bitcoin to $0
Do you know what an EMP is? Are you aware that the Sun could unleash an EMP to Earth and knock out all electrical systems?
EMP pulse storms from the Sun hit Earth in 1921, 1960, and 1989. But the big one was 1859 — knocking out the nascent telegraph industry, starting fires, and causing auroras all around the Earth.
In 2012, a storm similar in intensity to 1859 missed Earth by about 9 days on our revolution. Had it actually hit us, images resembling the movie 2012 would have been possible.
Other possible causes for power failures are overheated power grids, a lack of energy supply, brownouts, or rolling blackouts, that will certainly disrupt Crypto exchanges.
If there is a sustained global power outage, crypto will instantly be worthless. Of course, if this were to happen, lost Crypto valuation would not be our biggest problem. Physical survival would probably become priority #1. But in a post-apocalyptic society, I predict the only currency of any real value would be gold. So, if you want the ultimate hedge or insurance for disaster, physical gold in a safe location is probably your best bet.
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There you have it. I have now posted both my pros and cons. I have officially said my piece.
Now if you’ll excuse me, I’m going to stare at the price of Ethereum and contemplate my own FOMO and FUD over a kombucha. Call it an exercise in Buddhist mindfulness.
