Recent Op-Ed Piece By David Gerald Attacks QuadrigaCX, Calling It The Cause Of Bitcoin’s Failure
David Gerald is a writer for Foreign Policy, and he recently wrote an article that criticizes Bitcoin.
It is not any surprise that another writer is going after Bitcoin, but his piece particularly goes after the safety of Bitcoin, referencing the way that the QuadrigaCX situation is being handled.
In fact, he taunts readers, saying,
“Forget Bitcoin, try your mattress – cryptocurrency is about as safe as keeping your money in a sock under someone else’s bed.”
One of the main points of interest in the article is the way that hyperinflation has affected the world’s economy over time, when people literally believed that hiding their cash would help to keep it from the government.
The German economy suffered after the Great War as a result of hyperinflation, and the French Third Republic even had to find a way to pay for the war through the creation of the first income tax.
In the 1990s, Zimbabwe was the latest sufferer of hyperinflation. In fact, even decades after the hyperinflation originally occurred, the buying power has significantly dwindled, and the nation continues to have a poor political environment.
Even now, Venezuela has been the victim of hyperinflation, though they have decided to turn to cryptocurrency as a way to get out.
Addressing the possibility of hyperinflation in a first world country, Gerard notes,
“Bitcoin, its advocates keep saying, is the future. But in practice, it looks a lot like the distant past. Back then, you could lose your savings if your banker ran off with your money or died without revealing where it was stored. Today, there’s numerous protections in place for consumers – unless, that is, your cash is in bitcoin.”
Realistically, the notion that consumers should keep their money stored under a mattress is not something to joke about.
Consumers around the world, even in first world countries, do not always have the option of having an account, leaving them only to hold their cash at home, if they have one. According to statistics from the FDIC, there are at least 10 million Americans alone that remain unbanked.
Explaining, Gerard adds,
“In Canada, the Quadriga cryptocurrency exchange has gone into bankruptcy protection, leaving its customers bust. An exchange is roughly like a bank for bitcoin: they make your money easier to use in practice. But unlike a bank, there is usually no guarantees, protections, or reassurances that your money and its holder won’t disappear to a remote island. Quadriga’s founder, Gerald Cotten, apparently died in December. Quadriga finally revealed the news in January, and shortly after the exchange applied for protection from nearly $190 million in outstanding liabilities as it scrambled to find any lurking assets.”
Considering the theory that Gerard has in action with Quadriga, this story seems to support his notion that consumers may need to take better care of their funds. The whole concept of Bitcoin was to be a way to promote security of funds, rather than having to trust a bank.
Cryptocurrency makes it possible for consumers to store their funds, but the idea that the exchange would never make a mistake or get hacked or just run off with coins is foreign. If they have access to your private keys, there is an even greater risk, but it is still less risky than traditional finance.
The bigger issue is more about the ability for a single individual to hold all of these funds, and that this one person is trusted not to do anything to put people at risk. The people in control are often the cause of major financial disasters. However, in Bitcoin, the total number of assets is controlled by a protocol.
Decentralization protects consumers from being completely taken advantage or of being subject to the damages that a single individual can become the catalyst of.
Now, even though that protocol is in place, Gerard is using the unfortunate passing of Quadriga’s founder to discuss why Bitcoin is failing its purpose. Customers are waiting for the court case to be settled so that millions of dollars can be redistributed, since everything was kept in cold wallets that the founder never released keys for.
It isn’t clear if this was insensitive or careless on Gerard’s part, but he continued,
“This wasn’t a unique problem. Quadriga’s collapse follows from the nature of Bitcoin and why it failed as an electronic form of cash, leaving people worldwide stranded in its wake. Most financial institutions with thousands of customers and millions of dollars in holdings have bureaucratic and technical systems in place for such misfortunes. Unfortunately, Quadriga did not – and that’s sadly typical of exchanges.”
Gerard is clearly only using this case to further capitalize on consumer’s fears of what could happen on Bitcoin.
In reality, these people are suffering, and it has been no more than a ploy for a single writer to vent about how big and bad that Bitcoin can be, when it has already done so much for countries that have unbanked consumers that would have no other options without it.