It is amazing what you can learn during a lockdown. My proudest project was an attemp to understand crypto currency. But I have to admit this has been a abject failure. The single issue which escapes me is how or indeed why would you ever want to spend it?
Much has to do with listening to a multi part series on BBC Sounds about “Onecoin”. This particular crypto currency enticed people to remortgage their house, sell the car and a few offspring in order to plough cash into what turned out to be a massive international scam. The leading evangelist was a dynamic woman who created a fever pitch at her investment appearances only to completely disappear just before the scheme crashed. Many investors were ruined, their lives certainly upended. Yet a splinter group from Onecoin emerged and secured yet more investment.
Greed is the main motivator. We all would like to have the chance to double our money, especially when the interest rates are so appalling low. But an investment in crypto currency requires nerves of steel and logic of a higher order than I operate with. They question is how – or why would you spend it?
A couple of year ago a bitcoin was worth 3p now it hovers around £40,000 each. So why would you ever want to spend it? I read an article where a journalist had bought a bed with Bitcoin a few years ago. At the time he estimated the purchase set him back around £100 equivalent. By mid 2020 he recalculated that had he kept the bitcoin it would have appreciated such that his bed in real terms cost him £27,000. The further increase to March 2021 means the bed has now cost him £150,000.
Tesla cars are now able to be bought in Bitcoin. At today’s exchange you can get a Tesla car for 2 bitcoins. If you pay on delivery ( about one year at the moment) assuming a further astronomical rise in value you could buy four Tesla cars for 2 bitcoins. How does this work! And do you get any change, well you could – as Satoshi, and there are 100,000,000 Satoshi to one bitcoin. Luckily you won’t have to carry these around in a truck as they too are electronic. And here’s the next point of concern.
Your bit coin don’t actually exist, they are held as vastly complex forms of digital code. The servers known as mines, needed to generate your coin from the codes are vast, expensive, use huge amounts of electrical power and buried underground, some even in permafrost to keep the cooling costs down.
Thus if the Bitcoin in your pocket is doubling in value ever two weeks why or indeed how would you spend any, unless you are quite mad. If the mines are essential – could they be at risk from some extortionate body that threatens to switch the lights off. Could a power failure wipe your stash and then who do you moan to? And then there is your password.
This is not 123456 or “Password’ it is a huge code never to be forgotten as there is no ’forgotten password’ option. There just isn’t. If you forget the thing your stash can never be recovered. The bit of paper you wrote it on could be worth £500,000. Bank vaults are probably full of little bits of paper. And hopefully life partners are aware of their other half’s code. Pity the poor guy who lost his bit of paper and thereby his £250,000,000 of moolah. Or the chap who threw his laptop in the skip by mistake along with £200,000,000 fortune. Ouch is not the best meaning of the predicament.
I read a book during the pandemic which is set in the future and recalls the global disaster that occurred when civilisation as we know it collapsed when crypto currency mines failed due to a global sequential power failure. All governments worldwide became instantly bankrupt. Scary thought. And I’ve only just got to grips with contactless payments up t £45.