The Economist Shares Bitcoin Perspective, Crypto As Payment And Speculation
Bitcoin was featured in one of the world’s most influential publications today as an article was published explaining, “How to put bitcoin into perspective.”
“The best-known cryptocurrency has been a failure as a means of payment, but thrilling for speculators,” writes The Economist in the “Technology Quarterly” section of their latest issue.
The Economist cites the price chart of bitcoin over the last 5 years. CoinDesk’s bitcoin price data chart begins on July 18, 2018, when you could buy a single bitcoin for $0.09. In November 2013, the price peaked at $1,124. In December, it skyrocketed above $19,000 for the first time in its history. Toady, bitcoin is hovering between $6,000 and $7,000.
The Economist calls this the “rollercoaster” of bitcoin. In their article, The Economist explains the history of bitcoin, including its connections to the cypherpunk movement. Satoshi Nakamoto frequently referred to the cypherpunk movement and cypherpunk newsletters. Over the course of the article, The Economist highlights where bitcoin’s price has been and where it could go in the future – including one prediction of bitcoin being worth over $250,000.
Bitcoin’s price movements today are famous. However, as The Economist explains, bitcoin was never designed to be an object of speculation:
“Bitcoin was never meant to be an object of speculation. When the pseudonymous Satoshi Nakamoto published a short paper outlining his plan for bitcoin a decade ago, it was as a political project. Bitcoin’s roots lie in the “cypherpunk” movement, a philosophy that combines an anarchic dislike of governments and large companies with the techno-Utopian belief that computers and cryptography can liberate and protect people. Much of the early development of the internet was informed by similar ideas.”
The Economist also acknowledges that electronic cash was not a new idea. Electronic cash concepts are, quite literally, older than the internet.
“Electronic cash is not a new idea,” writes The Economist. “In a paper published in 1982 David Chaum, a computer scientist, had suggested using cryptography to create electronic cash, and the cypherpunks had been kicking such ideas around since the late 1990s. What made Mr Nakamoto’s invention stand out was that he had found a solution to one of the biggest problems with computerised money—how to keep users from spending the same digital coin repeatedly without relying on a trusted authority to check every transaction.”
Satoshi Nakamoto famously solved the double spend problem without needing to trust a centralized authority. Thanks to bitcoin’s blockchain, we can spend tokens securely without needing to trust a centralized third party. And, we can be assured that the tokens we’re sending are not simultaneously being spent somewhere else. That’s the innovation that makes bitcoin what it is today.
Next, The Economist explains proof of work, including how a network of computers providing “proofs” can verify transactions on the bitcoin network.
“All that computation takes a lot of electricity, and hence money (see article), so each new block earns its miner a reward, starting off at 50 bitcoin in 2009 and programmed to halve every four years. It is currently 12.5 bitcoin, or around $80,000. These block rewards are the only source of new bitcoin in the system. Mr Nakamoto argued that central banks cannot be trusted not to debase their currencies by printing money, so he set a hard limit of 21m for the number of bitcoin that could ever be mined.”
The Economist Claims Users Need “Specialist Software” To Use Bitcoin
The Economist’s article, overall, is a good but basic explanation of the bitcoin network, including its history and the blockchain technology behind it.
The article does have some unusual points, however. At one point, the article mentions that bitcoin hasn’t reached mass adoption because users need to download “specialist software” to use it:
“Even so, bitcoin has failed to become an established currency…One reason is that it is still not user-friendly. All participants have to download specialist software, and getting traditional money into and out of bitcoin’s ecosystem is fiddly.”
It’s true: you need to download “specialized software” to use bitcoin. In the early days, that meant you had to download a bitcoin client or even keep a copy of the bitcoin blockchain on your computer. Today, things have changed, and you can download a mobile app in seconds that lets you purchase bitcoin instantly.
The Economist also mentions the lack of a centralized third party as another barrier to mass adoption. If something goes wrong with bitcoin, you have no customer service hotline to call. That’s why it’s estimated 4 million bitcoins have been lost and never recovered.
The Economist Claims Bitcoin Adoption Is Down Among Major Companies
The Economist also makes another unusual point in its article. The Economist claims that few retailers accept bitcoin, and that the number of retailers accepting bitcoin has actually dropped over time:
“Legitimate businesses, with a few exceptions, have proved more cautious. A report from JPMorgan published in 2017 found that, of the top 500 online retailers, only three accepted bitcoin, down from five the year before.”
Expedia and Valve both stopped supporting bitcoin during this time.
It’s true: some organizations have stopped accepting bitcoin. However, by only looking at this statistic, you’re ignoring the fact that bitcoin adoption is increasing overall.
The financialization of bitcoin is well underway. Bitcoin futures markets are active and regulated. A bitcoin ETF may be approved within the year. Wall Street giants like Goldman Sachs and the New York Stock Exchange are jumping on board. Bakkt, with the support of Microsoft, Starbucks, and ICE, could create the world’s biggest crypto onboarding system.
The Economist doesn’t mention any of this in its latest article.
It’s Always Good News When Major Media Outlets Feature Bitcoin
The Economist is a well-established publication. This obviously isn’t the first time the media outlet has published an article on bitcoin. However, it’s always good news when an established media outlet spends a significant amount of resources researching and publishing bitcoin-related information – even if The Economist wasn’t overly positive about the future of bitcoin.
You can view the full article at Economist.com.