Experts Suggest Hype Around Blockchain Is Unproven, Bitcoin’s Failure Is A Ticking Time Bomb
Are Cryptos And Blockchain Nothing More Than a Hype?
Ten years ago, after Bitcoin was announced, the finance industry got split into two groups — those who supported the crypto, and those who were against it. While crypto supporters claimed that this is a necessary new technology that would revolutionize the finance industry, and the entire world, at that, those against cryptos made some valid points regarding why this technology should not be trusted.
For example, two patterns in technological invention and commercialization usually follow technologies deemed “worthy” or “valuable”. Those are the technological breakthrough, and an existing demand for such new technologies. These technologies need to come in stages and be developed over time.
According to many, blockchain technology, and Bitcoin, which is now considered to be blockchain's first application, came at once. Bitcoin came as a digital currency that has no central bank or any type of authority that would back it up and give it value, where transactions are verified via the distributed ledger, which is blockchain.
However, a lot of people like to point out that cryptos also brought a libertarian utopian hype that promised some kind of revolution against banks, governments, and centralized authorities in general. In fact, many believe that the hype is the only reason why cryptocurrencies grew to be as big as they did in the first place and that Bitcoin owes its success to this idea.
As soon as this idea took place, Bitcoin started growing against the USD, it brought numerous altcoins with it and has inspired a flood of ICOs throughout 2017. Then, at the start of 2018, the hype blew over, and crypto dropped from its newly-discovered heights. Most of them lost at least 70% of its value, starting with Bitcoin itself.
Why Cryptocurrencies Are Not Money
This is believed to have happened due to the fact that cryptocurrencies cannot fulfill their function as money. Money is defined as an asset that stipulates three criteria. Those include serving as a medium of exchange, a storage of value, as well as a unit of account. So far, cryptocurrencies failed to meet any of the three criteria.
The lack of crypto adoption still prevents digital currencies from being used in more than a few transactions where they actually serve as a medium of exchange. Most of their usage comes down to trading one coin for another, or for fiat money at best. A few online shops do accept them, but even they mostly allow the purchase of gift cards that can be used for obtaining actual items.
Other purchases mostly include spending digital currencies on the dark web, where they are mostly used for illegal activities, which is not giving them any positive points. Furthermore, they are highly volatile, which means that they cannot serve as a storage of value either since their value is highly questionable, and almost never stable.
Finally, cryptos cannot even be used as a unit of account, considering that their value is still defined in USD or other fiat currencies.
If this is not enough to disprove them, there is also the fact that money in a modern economy depends on the support provided by institutions. Not only that, but it needs to be accepted by the banks and governments, who also need to support it in order for it to be stable and maintain its value. Cryptocurrencies failed in this regard as well, thanks to their decentralization and self-governance.
Many consider even this to be a lie since some studies of trading patterns in the crypto market indicate that there is a small group of companies and individuals that own large amounts of cryptos, while most other traders only deal with small amounts. Furthermore, most of these transactions are being made in crypto exchanges, which are centralized.
And What Of The Blockchain Itself?
While cryptocurrencies seem to be a failure that did not deliver anything of what they promised a decade ago, there is still a matter of blockchain technology. Is this technology doing its part and is it worthy of further development and research?
If blockchain is viewed separated from crypto, it needs to answer the question of whether or not there is a need for it. In other words, it needs to prove that it is a new, technology that is actually necessary for our technological advancement. Right now, there are numerous experiments taking place all around the world, with no real results that would prove that it is actually useful. Furthermore, all of these experiments require the involvement of governments, regulators, or some other type of centralized authority.
While blockchain can do things that other systems have already delivered, technology does not depend on it. So far, it did not deliver anything new. As such, it is basically useless, and it will be until a new and unique use case is found.