I rarely find myself reading an article that is so atrocious that I feel compelled to give a complete and thorough rip of something that’s been posted by another author. However, this recent piece written by CoinDesk (owned by DCG now — felt compelled to mention that) titled, ‘Can Bitcoin Be Destroyed? The 7 (Unlikely) Paths to Irrelevance’ (Source: https://www.coindesk.com/can-bitcoin-destroyed-7-unlikely-paths-irrelevance/).
These are the types of articles that I want to start dissecting for the inherent lack of truthfulness that is contained within. Apart from the fact that the title itself is extraordinarily presumptuous, the 7 ‘reasons’ contained within all possess circular arguments, at best. The only reason that I decided to rip through this article is because it was posted as a ‘feature’ cryptocurrency article on TradingView.
Listen, I understand there are a lot of Bitcoin Core lovers out there. I get that. But I’m not here to shill, I’m here to gain truth. This mentality in cryptocurrency that causes people to adopt the mentality of “anything that isn’t a tacit endorsement of my coin must be FUD!” is childish, at best. I’m not ‘paid’ by anyone (shit, I wish I was!) and I have no incentive or ‘dog’ in this race, per se. I do like truth and that’s what my mission is; to give truth.
Without further ado, let’s get down to the contents of this article, shall we?
CoinDesk Reason #1 — “Armageddon”
CoinDesk Review: According to CoinDesk, the chances that there is an apocalyptic-esque event that will occur within the next 5 years is slim to none. However, in the event that it does, the listed impact is ‘sudden to death’
This is the only ‘reason’ that was given by CoinDesk that was written accurately. Obviously, in the context of an ‘armageddon’, Bitcoin Core and just about any other facet of mankind will be rendered useless. This goes without saying, but I guess they wanted to add ‘humor’ into the article.
CoinDesk Reason #2 — “Critical Bug”
It’s not so much that I disagree with the logic embedded in this reason, but I feel as though the situation itself was somewhat misrepresented here.
The blockchain is what it is. A bug implies that something could ‘malfunction’, which is simply not true. What could happen, however, is that there is an unintended consequence as a result of poor calculation by the developers themselves.
Think this isn’t a risk? Read this article regarding Segregated Witness: https://medium.com/the-publius-letters/segregated-witness-a-fork-too-far-87d6e57a4179
Another article regarding the legal ramifications of SegWit as a temporary ‘fix’ in place of something more concrete could be more obvious as the implementation of smart contracts becomes more prevalent in the community: https://news.bitcoin.com/risks-segregated-witness-problems-evidence-laws/ (CoinDesk also provided an article yielding credence to the theory that SegWit could give birth to greater legal problems in the future as well — https://www.coindesk.com/the-risks-of-bitcoins-segregated-witness-problems-under-us-contract-law/ ).
Let’s not forget that SegWit’s main purpose was to fix transaction malleability, which was an inherent flaw in the design of Bitcoin that everyone acknowledges was a flaw. Oddly enough, in another CoinDesk article, the issue of transaction malleability was explored in-depth (https://www.coindesk.com/bitcoin-bug-guide-transaction-malleability/). Want to know the title of the article? ‘What The ‘Bitcoin Bug’ Means: A Guide to Transaction Malleability’.
We haven’t even touched on the fact that Blockstream’s irresponsible endorsement of Lightning Network can and has led to the permanent loss of Bitcoins for those attempting to use this unfinished feature that has yet to be safely verified as ready to use by the Bitcoin Core developers themselves. Don’t believe me? Here are plenty of articles that can attest to this fact:
https://www.coindesk.com/bitcoins-lightning-network-problem-people-already-using/ (another CoinDesk article)
There’s also no guarantee that the Lightning Network will be free from ‘bugs’ even when finally realized.
I’d like to remind everyone that these issues are things that have become prominent within Bitcoin Core over the last 12–14 months, not years.
Thus, the idea that the likelihood of such a ‘bug’ occurring within Bitcoin Core is ‘low’, seems to be irresponsibly dismissive at best. There are other issues inherent within Bitcoin Core’s design that may be exploited to a greater extent in the future that have yet to be remedied at this point.
What I also disagree with under this reason is the idea that Bitcoin Core will face ‘sudden irrelevance’. The price would be drowned if anything spectacular happened that adversely impacted Bitcoin Core — however, I strongly doubt that ‘sudden irrelevance’ would take place. Since the article fails to define what terms such as ‘low’ likelihood or ‘sudden’ irrelevance truly mean, it’s hard to really determine and ascertain how hyperbolic their usage is in the context of the assertions that the author makes throughout the article about various characteristics of Bitcoin Core.
CoinDesk Reason #3 — Forked to Irrelevance
The author states for this one that, “Bitcoin can be forked multiples [sic] times if the community disagrees on the path forward, for technical reasons (or ‘because money’)”
This comment, in itself, betrays a relatively poor understanding of the community, forks in general, and even the technical aspects of how blockchain works.
For those that have a deeper understanding of Bitcoin and its history, the Bitcoin Cash creation should not have come as a shock at all. Its creation primarily stems from the debate among prominent developers and community members over whether Bitcoin Core should increase its block size or not (I know, it is extremely stupid and trivial but it is what it is). This debate has evolved over the last 5+ years and has created a tremendous schism in the entire Bitcoin community and possibly cryptocurrency itself.
This is the only MAJOR source of contention that exists within the Bitcoin community currently and is one that has been at the forefront of conversation for the past few years. Apart from this, there’s probably a general consensus among the community to keep things as they are (although I’d imagine there are numerous other aspects that would come into question as well). In my personal opinion, neither ‘side’ of the debate has truly invented a viable long-term solution that would kill both arguments.
Getting back to the point — A divide of similar proportions is extremely unlikely to happen at any time in the next 5 years. Another major issue with the listing of this reason is that Bitcoin won’t be ‘forked to irrelevance’. Many of the forks do lack the community approval necessary to achieve any level of significant consensus and most likely never will. Many of the forks that have been created recently possess no level of relevance in the cryptosphere at large.
Bitcoin Cash is the only fork that has enough hashing power to remain competitive. Perhaps one could include Bitcoin Gold on the list as it is still one of the top 15 cryptocurrencies by market cap at this very point in time. Other than that, the other forks are not prominent enough to create any ‘confusion’ among those in the cryptosphere or the general public at large either.
The article concludes this reason with the statement: “Should this occur, I believe bitcoin would lose its dominance, slowly sinking into irrelevance. Again, it is the interest of the community to not let this happen.”
What dominance? Bitcoin, at the time of me writing this, currently only represents 33.42% of total investment into cryptocurrency at this current point in time (https://cryptolization.com/ ).
The fact that the concept of ‘irrelevance’ is not defined in addition to the statement, “…it is the best interest of the community to let this happen” reveals how poorly thought out this article was.
The idea that Bitcoin Core’s survival is in the best interest of the community has been thoroughly debunked by the fact that nearly 70% of the community has opted to spend their money on an entirely different coin and a solid percentage of them have no problem sticking by that decision either.
CoinDesk Reason #4 — Government Crackdown
Anyone who thinks the risk of a ‘major crackdown’ occurring within the next 5 years is relatively unlikely has zero fundamental understanding of the inner workings of the market, western governments or economics in general.
Think about it for a second:
There’s an unregulated industry where people are trading securities between themselves and others on a consistent daily basis with absolutely zero oversight. Some of these people are making purportedly between a few hundred to several million dollars in an extremely short amount of time. The wallet structure for Bitcoin makes it a near-impossible task to track individuals through use of that information alone — let’s not even get started on the other cryptocurrencies.
Thus, criminal activity, money laundering, bribes, corruption, human trafficking and a host of other crimes could be easily facilitated by the use of cryptocurrency. Even in the absolute best case scenario where this doesn’t ever happen in any situation whatsoever, the sheer additional tax receipts that any country could receive off of effective translation would be a gamechanger. Plus, the price manipulation is blatantly obvious for any and everyone to see (sorry nonbelievers who believe the volatility is entirely due to the extreme indecisiveness of Bitcoin, see: Tether/Barry Sillbert). iFinex’s potential meddling into the price of Bitcoin through Tether is a crazy fact that could potentially compromise it’s future
Do you think any government is going to acknowledge all of those facts and not hammer down on Bitcoin? It’s a harsh reality, but one that must be understood and accepted by the crypto community if it is to move forward in the wisest way possible.
Potential Government Regulation
In my opinion, government regulation is not a mutually exclusive outcome from the success of the crypto community. Just because there is oversight doesn’t mean that there is centralization, and that’s an important distinction to make. Also, if there is enough proven real-world utility for Bitcoin Core, then it will not be regulated out of existence.
I’m not even sure if that is a plausible reality for it given the constitutions that exist in the Western world. At some point, principles such as freedom of speech will stop governments from regulating this thoroughly enough. People have an explicit right to use Bitcoin. There are no principles that state that people have a right to wash/traffic dirty money, invest in assets without paying any taxes, or launch seceurities/IPOs (ICOs) without meeting any regulatory requirements.
I’m not trying to ‘shit’ on Bitcoin Core, I just want to help everyone come to level-headed conclusions about the fate of the cryptocurrency and how governments are evaluating it. I don’t think that there is a huge bank conspiracy to kill it. The coin is only worth about $300B in market cap (always fluctuating) and losing its dominance in the community, so I can’t imagine banks that are hauling in trillions annually are panicking about Bitcoin. The fact is that with the high fees, complicated technology, and extremely slow time of transfer for damn near any amount of Bitcoin, the banks hardly need to kill it — it needs to prove its sustainability first and 2018 is a critical year.
But I digress.
CoinDesk Reason #5 — Major Hack
I agree with the estimated probability that such an event will happen in the next 5 years. I mean, after all, it’s already happened within the last 5 years (Mt. Gox), and exchanges continue to get ravaged from time to time (Google: Exchange Hack).
I think another factor, however, that is not considered here is the actual solvency of some of these exchanges. If these entities are properly insured (yes, there is insurance against hacks for cryptocurrency exchanges), and they keep a respectable sum of crypto in their cold storage, and customers could at least be reimbursed to some extent, then I can’t imagine it would crash the price of Bitcoin specifically. There were several incidents that occurred in 2017 and in the beginning of 2018 where various exchanges were hacked and even a couple cases where exchange owners were outright robbed.
That’s not the issue though.
Let’s say an exchange closes down because they simply don’t have the necessary funds to allow customers to withdraw? No hack, no foul play (maybe). Just pure money mismanagement. We have to remember that there is NO oversight in this industry. Thus, there’s no SEC to make sure that these exchanges follow responsible accounting practices, no mandatory third-party audits to verify that the funds that customers place on the exchanges are actually being kept managed properly, and due to the nature of cryptocurrency, no holds are in place to ensure that exchanges don’t just merely announce, “We got hacked!”, to cover for the fact that they actually don’t have the appropriate funds to cover anymore transactions.
How could this happen?
Easily. Let’s say you and a group of investors deposit 100 BTC worth of investments in an exchange. Rather than the exchange keeping your money apportioned in a corresponding wallet, they decide to spend 20 BTC of that money. They can get away with it because it’s highly unlikely that you and ALL of those investors will try to withdraw your money at the same time. Thus, when you want to withdraw your portion, they can just pull money from other investors that have invested in the exchange and use that to pay you off. This is sort of how Ponzi schemes work…Wait. No. This is exactly how Ponzi schemes work.
Not saying that this is the case, but do you or I have any concrete evidence to the contrary? I mean real evidence, not the “Why would they do something like that! They got Jim, Billy, and Bob working on the project and they’re great guys!” argument.
Tether might be the perfect example for how shit could hit the fan on a conglomerate of exchanges. It’s collapse could preempt the insolvency of Bitfinex and just about every other USDT paired exchange (a significant amount are owned by the same overseeing company — see: not a coincidence).
CoinDesk Reason #6 — ‘Better’ Cryptocurrency
This is the reason that the article gives that makes me feel like they’re in complete denial about the reality of cryptocurrency right now.
Listen, this isn’t an article bashing Bitcoin Core, but I’ve stated this before — Bitcoin Core was created as an experiment (not my words — they’re Satoshi’s). If you evaluate some of the forum posts by the earliest members of the crypto community and the developers that worked on Core, you can see that they were limited in resource, computing power, and qualified developers who had the knowledge and intelligence to improve Bitcoin Core in a sustainable manner. Satoshi worked his ass off and so did Gavin, Larimer, Theymos, Gary and many others whom I’m probably forgetting to mention right now — but this was nearly 7–9 years ago.
Look, when Bill Gates and Paul Allen finally created the personal computer, they made one hell of an innovation and it was one that evolved the computing world and brought it to an entirely different platform. That doesn’t mean that their innovation was the end-all, be-all for computers. Only a fool would suggest that the Windows 95 would never become obsolete (newsflash, it is). However, it’s discontinuation from popular use doesn’t make the technology itself any more amazing. It just means that we’ve advanced.
In a similar way, I think a lot of cryptocurrencies have started to outperform Bitcoin Core in terms of usability, utility, network flexibility and optimal settings. You have to remember that Satoshi wasn’t working with the same foundation that a lot of developers in cryptoland are working with today. Some of these teams are receiving funding in the hundreds of millions of dollars. At the time that Bitcoin Core was developed, crypto was a group of hobbyists — much how the computer community was before personal computers ever existed.
But I digress.
There are already very strong competitors to Bitcoin Core. I’d go as far as to say that every other coin in the Top 10 marketcap list is a viable competitor. A lot of them offer better technology, quicker transactions, and a significantly better use case. The fact that some companies (Stride, Microsoft, etc.) have revoked Bitcoin payments from their platforms speaks to Bitcoin Core’s failure to scale appropriately in usage. I can’t think of any other cryptocurrencies that have faced this type of revocation — on as public of a scale as Bitcoin Core.
However, this is all conjecture without a definitive definition for what we mean by ‘better’. Fortunately, the author was diligent enough to at least quantify this term to some extent.
The article states:
(By “better,” I mean more profitable to mine and with lower transaction costs for users, everything else being equal.)
Criteria #1 — More profitable to mine
Like it or not, Bitcoin Cash has proven itself more profitable to mine at several different junctures in time than Bitcoin Core.
In fact, at this very second in time, it is more profitable (when controlling for extraneous factors like additional block time, competition, hashing power, mining algorithm, etc.) to mine Bitcoin Cash.
Criteria #2 — Lower transaction costs for users
There’s more than enough demonstrable evidence that transaction costs are significantly lower for users. Transaction time is significantly lower as well.
Here are the average fees for Bitcoin Cash:
Here are the average fees for Bitcoin Core:
What’s even crazier is that Bitcoin Cash is far from the only one on the list that fits these qualifications. There are eight other cryptocurrencies that are currently more profitable to mine with lower transaction fees: https://www.coinwarz.com/cryptocurrency
The article then states:
Let’s face it: this is more about economics and less about convenience. That cryptocurrency would have to be much “better” to overcome the network effect and brand capital from which bitcoin benefits today.
However, there’s clear evidence to the contrary:
Just in the last 2–3 months alone, altcoins have shredded Bitcoin’s Market Share. The parity in the market has never been greater.
The article then states:
There is another way economics could play out: if the price of electricity went up very significantly, mining could become unprofitable. Only large pools where electricity is relatively cheaper would remain.
This is a tough cost-security trade-off. Bitcoin would have to find a way to lower the cost of security while maintaining the integrity of the ledger.
This statement, in my opinion, once again betrays a lack of fundamental understanding of the principles of how Bitcoin’s proof of work algorithm is setup. If electricity became prohibitively expensive, miners would mine less or move to other coins. As this happened, the hashing rate for Bitcoin would naturally decline. Since the hashing rate is directly proportional to the difficulty of Bitcoin’s proof of work algorithm, a noticeable decline would result in an inherently easier algorithm. This is a built-in feature of Bitcoin to ensure that the block times remain consistent and that the coin will retain its mining profitability.
I’d imagine that a decrease in miners on the network due to prohibitively high electrical costs would also greatly increase the amount of unconfirmed transactions. Thus, fees would soar past where they are at this point as well. This would mitigate some of the profitability issues too. Although, it could potentially kill the coin entirely as it would just become an infeasible practice in theory. If the Lightning Network works how its alleged to work, Bitcoin Core could meet its death in 2020 when the next ‘halvening’ occurs (http://www.bitcoinblockhalf.com/), unless the price goes through the roof.
CoinDesk Reason #7 — Market Fatigue
According to the author:
“If crypto startups fail to deliver any tangible value in the real world, people could slowly start to lose faith in cryptocurrencies and tokens. (Something that arguably happened during the bear market of 2015 and 2016).”
The likelihood of most crypto startups failing to deliver any tangible value in the real world is extraordinarily high. To think otherwise is to be a lifelong, pledged consumer of crypto-brand Koolaid.
This wild underestimation is then followed up with the statement:
In this case, the growth of the market could slow down and its value eventually stabilize. The crypto market would lose its attractiveness from an investment point of view, leading to further decline and so forth…
Personally, I do believe that some crypto startups will eventually create value in the real world. In any case, the crypto market is still nascent and we still have time until it gets boring. As history has shown also, the market is always capable of bouncing back.
The first paragraph just seems to be pure conjecture. Although I do think a vast majority of current projects appear to be bullshit, I don’t anticipate that the crypto market as a whole would lose its attractiveness because this wouldn’t just be one defined event.
I also think that the non-existent barriers to entry in the crypto markets and relative ignorance of new investors is something that will be eliminated following the exposure of many of these phony “ICOs”. Thus, a bubble of the nature that the author described should be a welcome transition to all those in the cryptoworld.
Hopefully, I’ve exposed the significant number of logical/factual errors that were in that CoinDesk article. I hate to rip a fellow journalist, but as a scholar of crypto, I felt compelled to let people know where I believe the truth stands on the statements that were made within, because they don’t even come near reflecting principles that I believe to be true based on hard-evidence, economic theory/principles, historical context, analogical examples and objective facts.
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