Cryptocurrency is the future. It’s wresting control of our financial system from the greasy mitts of fat cats and useless bureaucrats and giving it back to the people. It’s decentralised. Transparent. Democratic.
OK, sorry if you’ve been given that spiel before. Most of us have heard this recited by an overenthusiastic mate, family member or bad date turned part-time evangelical for the Church of Crypto when their Shiba Inu coin tripled in value.
“You should invest,” they say, waving a colourful app that looks a lot like a video game.
As someone who’s always been interested in the possibilities of tech, I’m attracted to the idea of cryptocurrencies (digital currencies that use a decentralised database to track transactions). The idea of removing the friction that comes from middlemen and gatekeepers to see what happens as a result is exciting! Building unique digital items (NFTs) or organisations with transparent, enforceable rules (DAOs) are some of the intriguing new tools in our digital arsenals built off the back of crypto.
But like any other technology, cryptocurrency isn’t inherently a good thing just because it’s new. As I mentioned in the last edition of WebCam, I think we have to approach all new technologies with scepticism after seeing a generation of technology radicalise our uncles and foment genocides and violence so they can show us ads for Snoodies.
Boosters are happy to skim over the dark side of cryptocurrencies. There are scams, endemic wild speculation and profiteering, and catastrophic environmental impact. These issues aren’t unique to cryptocurrencies, but I reckon that something held up as “the answer” needs to answer a few more questions.
The difference in opinion between the boosters and the cynics can be easily explained: the former believe in the promise, the latter look at the reality of what we have now. Cryptocurrency promoters believe that many of the critiques are transient and not permanent. Critics disagree.
Let me give you an example of this gap. A month ago, I thought to myself: “Hey, you call yourself a tech reporter. How can you write about cryptocurrency when you’ve never actually bought any?”
So I did. I searched Google for an exchange, which is the online marketplace where you can buy cryptocurrencies. I settled on a major, reputable exchange called Coinbase based on some online reviews. I set up an account on a slick mobile app which needed me to submit a government ID, which didn’t work the first few times. When it finally accepted my passport, it struck me as ironic that I had to volunteer a whole lot of personal information that’s secured by the government so I could use this decentralised, supposedly anonymous technology.
I bought a combination of Bitcoin and Ethereum, the two biggest cryptocurrencies whose infrastructure ungirds most of the industry, using a credit card. Easy enough, right? The purchase went through instantly, minus fees taken by the exchange as the middleman.
Over the next couple of weeks, I saw a lot of green (gains) and a few days of red (losses). Prices for the two currencies ping-ponged around for reasons beyond me. All I knew was the app showed a rough trend upwards for my portfolio, which gave me a dose of dopamine every time I checked it.
Preparing for this column I thought it was time to sell up and realise the fruits of my capital. I had made $42.75! Actually it feels wrong to say “I” made it. It just increased. But I’m cool with that.
That’s when I hit a hiccup. Coinbase wouldn’t let me cash out because I’m Australian. Something I hadn’t figured out in my research was that the exchange was happy to take Australian dollars to buy cryptocurrency but wouldn’t let me sell it. Why? Not sure. But it felt crazy that one of the biggest establishments in crypto hadn’t figured out (or didn’t want to figure out) how to be fully functional in a country like Australia.
I can’t help but feel like a regulated technology would stop a half-baked service from being offered.
This is crypto in a nutshell: despite the promise of a better world, it’s beset by many of the existing world’s problems while also inventing some new ones. I remain tantalised about what it could be, but that feels so far away. I want to believe.
That’s what I want to cover in CryptoCam, a monthly column that will be your guide to the bullshit and bullishness surrounding crypto.
Oh. And please don’t ask me how this is going to affect my tax.
Congratulations! You have now personally contributed your hard-earned to international crime and terrorism.
When all the legitimate, regulated, means of transferring funds are about 10000 times faster and cheaper and more secure (another $120M stolen from compromised wallets a couple of days ago: https://www.theverge.com/2021/12/2/22814849/badgerdao-defi-120-million-hack-bitcoin-ethereum), who do you suppose is actually using blockchain? Crooks and speculators (dupes).
There is no real problem for which bitcoin and friends is a good answer. Clever mathematics, sure, but not actually useful.
Congrats, you have reinforced the rhetoric of wall st which prefers middle people to handle the transfer of your wealth and tax you in the process for their laborious and slow funds transfers, charge you a fortune for overseas payments, while at the same time investing themselves in cyrpto while it’s cheap. Who is using the block chain? Facebook parent company recently changed their name to announce they are all about the metaverse (please look it up).
People crying that cyrpto uses electricity and therefor bad for environment? We’re commenting in Crikey using computers, banks conduct all their tranbsactions using computers.
June 2020 (FY20) show fraud on payment credit card transactions $447.2 million.
The problems crytpo solves would take pages to outline, but briefly unlocks secure secure immutable contracts that can be used for property, trades, insurance, legal, voting, and a host of other applications.
I rarely comment on Crikey articles because I defer to the experts, but I can see that rationale doesn’t extend to other people commenting on a crypto article using knee-jerk responses they gleamed from rumors spread by wall st.
I know of which I speak (except for the occasions where I’m just looking for a rise).
The premise of crypto is the automation and “proof” of “trust”. That is a mirage: trust is a social phenomon, and once you have it, you can build systems that actually work, efficiently.
You’re just towing the spinner’s line.
Just to put some meat on those numbers for the players at home:
Middle-people: with bank transactions these are well known and understood companies, all heavily (if imperfectly) regulated. With bitcoin you have no idea who they are or where. Until recently four of the top five miners were in China, but China shut them down, no doubt because the power they were consuming was causing problems, and the Chinese government is not famously in favour of financial systems that they don’t control. Exchange sites and “wallets” are just a computer sitting in some random guy’s basement, which is why the security is so abysmal and “coins” keep going missing from “wallets”. There are no security teams. Just hacked-together software with the usual array of bugs and insecurities.
Slow: Bitcoin has a scalability problem. It can’t do more than about seven transactions per second (and of course it’s burning down forests to do them). Etherium is a little faster and a little greener, but at its peak it manages about 45 transactions per second, some three orders of magnitude lower than, say, Visa or Master Card.
Charge for overseas payments: depends on how you do it, but sure, credit cards charge a known, fairly low exchange rate conversion fee, bank transfers also. Bitcoin miners charge a fee for every transaction, even local ones (there are no local transactions: they’re all international). It varies. Currently about $2.20USD, but it was as high as $50USD per transaction back in April. And you almost certainly still have to pay an exchange rate conversion fee if you want local currency at the end.
Electricity? Your answer is just funny. Bitcoin processing (those seven transactions per second) consumes more power than Finland. More power than all of the data centers of Google, Facebook and Microsoft combined. And while all other technologies tend to become more efficient over time, bitcoin mining consumes electricity related to its value (because of economics), which often goes up.
Problems solved? You’re suggesting that no-one has ever traded property or bought insurance or voted before? Those are not problems that need cryptocurrency solutions. Name one. Just one real problem that only crypto can solve.
I guess you lost some money from bad investments in crypto and so are now invested in bad mouthing it with fairy tales…
China did not shut down miners because of electricity problems, they have huge hydroelectric
systems, they shut it down because they will be releasing their own digital yuan, which will be tied to their social credit system.
More and more there are renewable energy bitcoin farms popping up, because the incentive to mine is to make money, so the incentive to use green power is huge. Just look at El Salvadors plan to create a Bitcoin city using hydrothermal power.
And as there are literally 100s of cryptos, there are many layer 2 solutions to the scaling issue, including using proof of stake instead of proof of work. Maybe you know all this and just choose to cherry-pick to support your agenda? Regardless, the capitalist fiat system of endlessly printing money is well and truly broken and one of the major courses of the younger generations being locked out of the housing market, and slaves low wage growth.
You really are dreaming to think exchanges are hosted from a “random guys basement”. The modern mining farms are huge warehouses full of computers, and exchanges are million dollar businesses. My local exchange, Independent Reserve is located in Market St Sydney.
Problems solved? I don’t buy property because inflation locked me out of the market. Most cryptos are deflationary. And pretending that voting isn’t drenched in real world problems is just denying reality.
Remember the last global recession? That didn’t happen because of crypto, that happened because of rapant greed within a badly regulated banking system, and when those banks went bankrupt, all of a sudden we were a socialist society bailing the banks out with public funds.
You have accurately outlined the problem/s with the current fiscal arrangements domestic & international but to suggest cryptos – the malformed hybrid offsring of IT wonks and scam artists – as a salve is unconvincing.
You have just echoed a tired old narrative that crypto is just about scam artists.
If that were the case, each week when I go out shopping with my crypto Visa card the vendors would knock back the transaction, but that never happens.
I guess the rusted-on cuklt of fiat will wait until their banks adopt crypto before they can believe in the self-evident technology and cultural shift, of course by that time you’ll have lost any type of opportunity of being an early adopter.
While all you folks are trying to tell me how great paper money is, my crypto is earning 4-65% APY.
This is a very weak argument.
Crime and terrorism have been funded using untracked fiat transactions for decades and there is no public ledger available to track ANY of these transactions.
Blockchains provide a VERY public record of every transaction processed and when combined with KYC requirements for fiat off-ramps to Australian bank accounts, your ‘crime and terrorism’ argument is more like a wet lettuce.
Now for some context regarding that hacking – it was a DeFi smart contract, which are well-known for carrying a high security risk.
Now, if you understood what would be required to hack the BTC network, you wouldn’t be so dismissive 🙂
No doubt that public reporting is why bitcoin payments are the preferred payment method for the epidemic of ransomware hacks at the moment.
Sure, crime used non-bitcoin techniques to move money before bitcoin: ie. forever. This is news? Transaction tracking is a thing though, and most countries have interests in doing better at it. Remember how much trouble Westpac got into for doing it badly? Opting not to do it at all, by deliberately skipping as much government surveillance as possible, seems like a move in the wrong direction to me.
Hacking BTC (i.e., creating fraudulent transactions) only requires controlling more than 50% of the mining. BTC is probably large enough now for that to be difficult, but can be a risk for smaller or newer systems. Hacking exchanges or wallets is just hacking. Much of current mobile-device malware is directed at attacking bitcoin wallets. Bitcoin account substitution in transactions is a common scenario, and was the entire purpose of a recent Tor endpoint attack.
I can’t help but be amused by the fact that what follows this statement is an experience of nothing but friction, middlemen and gatekeepers.
A more accurate version of that first para would be something like:
Cryptocurrency is
the futurea scam. It’swrestinglacking the important controls of our financial systemfromand putting it in the greasy mitts offat catswhales and uselessbureaucratsgrifters and givingityour hard-earned back to the people above you in the pyramid of this ponzi scheme. It’sdecentralisedecologically disastrous.TransparentOpaque.DemocraticLibertarian nonsense.Such tired old arguments from people that believe anything Elon Musk trolls out without doing any proper research;
It found that Bitcoin consumes 113.89 terawatt hours (TWh) per year, while the banking industry consumes 263.72 TWh per year.
I’m not sure that’s the slam dunk you think it is. I think I can pretty confidently say Bitcoin is not processing 43% of the volume of transactions that the banking industry does.
Yes, because the endless money supply and regulation of financial instruments and derivatives ensures utmost financial stability, reduces manipulation and provides a fantastic hedge against inflation.
The amount of projection and magical thinking required to assert something as volatile and prone to pump-and-dump as crypto is a hedge against inflation and a solution to market manipulation is truly extraordinary.
Peeps be dumb. One born every minute.
Yeah, I feel really dumb turning 5 figures into 6 figures.
And no shame?
Oh yeah, rattled by shame at making profit on an investment. Beleaguered by shame for investing my hard earned wages into the future of finance. Burdened by shame for using evidence-based facts against fiat shilling FUD.
Why would I be ashamed for earning a profit from my hard earned wages?
You could, with that attitude, make even more dealing smack.
Nah Cam. I suggest you stick with your rapidly devaluing fiat currency. I hear storing it under your mattress is also the safest strategy.
What about the Reds under the bed? Or is it thr Greens nowadays?
It makes colourful wallpaper.
Go the gold mate. Teeth, rings, hairy chests. Gold is at home everywhere.
The north Vietnamese use wedding rings (7.5grams) as the standard unit for land value. Inner city land might go for 10 rings per square metre or more.
Indians do it with bangles, bracelets and filigreed wedding saris.
Quick cash is just a match and a handful of ashes away from several grams of gold.
Only a fool keeps wealth as rupees.
I joined coinbase a while back, watched some videos, got given some cryptocurrencies for doing that. The useful thing about coinbase is you can convert between cryptocurrencies for no fee. So I usually swapped my free sample for something else, trying to choose cryptocurrencies that seemed to have some practical application that I thought might be useable in the future. e.g. ADA – allegedly the greenest crypto, XLM, MATIC, DOT, SOL, LINK…anything the big companies were backing (banks, google etc). I’ve never bought cryptocurrency with fiat currency. Watching videos I probably got gifted about $100 worth of crypto. Over time this has become around a $1000. At one point I transferred some to coinbase wallet. Only to find that the mining fees are ridiculous. e.g. to buy a $4 coffee might cost hundreds in mining fees. My foray into all this has just been for educational purposes with no intent to use or invest in it seriously. I also discovered Cryto Refills, an android app which could convert cryptocurrencies into digital gift cards for Playstation, Amazon and so on. That worked, so if you need your money back it might be an exit strategy.
I’ve never touched Coinbase, even when I was a noob.
Can’t you transfer your crypto to a wallet on Binance, BTCmarkets, or IndependentReserve? They all provide withdrawals to Australian bank accounts.
Binance, BTC Markets and Independent Reserve all operate within Australia and adhere to KYC regulations to allow an easy fiat off-ramp to Australian bank accounts.
I’m not sure how you wound up on Coinbase as an Aussie, unless you were being deliberately obtuse for this article.