Bitcoin Ponzi?

Over the last few weeks, the crypto market has suffered from substantial losses. The last months showed once again brutally how volatile Bitcoin – and with it the entire cryptocurrency market is.

Ever since I first read the Bitcoin white paper and learned how the blockchain technology works – I have been a big believer and fan of decentralized currencies. However, for over five years I have been telling people that while the blockchain technology is great and decentralized applications will be the future, there is no value in any of them – neither DAPPS nor cryptocurrencies – unless there is a real-world usage of them.

Let’s stay with the example of Bitcoin. With real-world usage, I imply that you must be able to first pay your ice cream, pizza, car or rent with Bitcoin. Secondly, the goods and services should be priced in Bitcoin. Not priced in US Dollar or Euro and then converted to whatever Bitcoin is worth in the second of the transaction.

So far, I can pay only at well-selected vendors on the internet with Bitcoin. But those vendors never price their products and services in Bitcoin. They always set their prices in USD or EUR and then convert it to Bitcoin. At my local Italian restaurant or supermarket I cannot pay with Bitcoin at all.

Why prices are set in Euro or dollars seems obvious. Bitcoin is extremely volatile. Example: Let’s say you are the owner of an Italian restaurant, and you decide to price your pizza in Bitcoin. Let’s say one pizza is 0.000278 BTC (which is $10 as I am writing this on June 13th 2021). You sell many delicious pizzas during the months but suddenly, at the end of the month, Bitcoin looses 40% of its value respective to USD. As you have to pay your rent, insurance, and employees in dollars, guess what? You have a problem.

Last week, El Salvador made headlines by accepting Bitcoin as legal tender. This event has been hyped by the BTC community and many smart persons. Why don’t we use El Salvador a case study and look closely whether people will price their items in USD or in BTC in the coming months.

But let me get to the point on why I started writing this blog post in the first place. What shrilled my alarm bells to me more than the volatility itself has been the community behind Bitcoin. As I watched a few YouTube videos of a recent Bitcoin (BTC) conference in Miami, everything screamed: Ponzi.

I repeat myself: I’m a BIG believer in blockchain technology in and of itself. But with every passing day, I realize that the BTC (Bitcoin) community is getting crazier and crazier making it clearly some kind of Ponzi with BTC being neither digital cash (too much volatility) and neither digital gold (clearly no hedge against inflation). The same is obviously true for many many other literal shit coins (the promoters of those should seriously be investigated into and brought to court).

Let us all focus on supporting and developing REAL solutions to REAL-world problems. There are some beautiful projects doing just that. Examples are Ethereum, Cardano, Chainlink, Polkadot, etcetera. They are working on extremely useful solutions for REAL-world problems. When it comes to digital cash, I bet we will see some kind of digital cash replacing the banking system sooner than later. It may be Dash, BCH (Bitcoin Cash) or BSV (Bitcoin SV). But it may also be the Digital USD or the Digital Euro issued by the FED or the ECB At the moment nobody knows! All in all, what we can do is get out of BTC and into useful projects with real-world applications.

Today I re-surfaced this excellent article from 2013 in which Yanis Varoufakis describes “the dangerous fantasy of apolitical money” and what that means for Bitcoin. This article seems to be more accurate today than ever before.

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