(Disclaimer: I know a LITTLE about Bitcoin and nothing whatsoever about any other cryptocoin. Life is too short to be interested in uninteresting details.)
Recently I was directed (via this thread?) to a conversation on a message-board devoted to cryptocoins. A noobie complained that one coin seemed to be a scam. The experienced coin-jockey laughed and said they're ALL scams; the trick is to jump off before the bubbles burst.
I hear that one crypto-coin was designed to be always worth exactly one U.S. Dollar! This seemed to contradict the whole idea of cryptocoins, which is to ride a tulip-like bull to heights of glory or depths of despair. Evidently the crypto-fans also found the idea of a stable coin hilarious — TerraUSD and LUNA coins lost tens of billions in value in one tumultuous week. In the olden times that loss would be a big deal. Nowadays, it's old news: stay tuned for a bigger financial disaster next week!
What happened to Beanie Babies? At least its bubbling boomers still have their dolls. Do those left with Terra-coins at least get a T-shirt?
And by the way, the BitCoin "blockchain," instead of being kept in a refrigerated vault in "Iron Mountain" like BankOfAmerica's records, is just bounced around a network of anarchists. To call it "democratic" ignores that it isn't "one man one vote" or even "One coin one vote." Has anyone studied what percent of the bit-mining capacity would have to be controlled by China (or Russia or Charles Koch) for them to push aside any blockchain blocks not to their liking? I guess part of the protection against that is the $25 Billion annual cost of Bitcoin mining. (There's that pesky 'B' again. That figure is based on the global average electricity price. I guess much mining is in cheap-electricity Iceland where BitCoin mining may now be a major component of Iceland's economy!)
And there's no value-added in BitCoin. If you bought the Coin for a nickel and sold for a dime you won't care about the $25 Billion, but if you bought for a dime and sold for a nickel you can write "I helped pay for that wasted CO2
" on your T-shirt.
Crypto does not require trust-based banking. I can send you money, you can send me money, and the transaction gets processed by the users of the platform.
. . . Also, you don't have to worry about whether banks like what you sell. . . .
Crypto transactors don't have a worry about that.
Banks (and central-bank money) in the prosperous democracies have a pretty good track record in recent decades of preserving value for users. Could this change overnight when the next financial crisis dwarfs the 2008 crisis in scale? Sure. But do you really think BitCoin will hold up while Dollar, Euro and Yen are plummeting?
And these defenses of cryptocoin seem to acknowledge that their main "legitimate" use is to finance
illegitimate transactions. Note moreover that devices to help the rich hide their profits are NOT a path to lessen income inequality.
Finally "transaction gets processed by the users of the platform" is somewhat misleading. Doesn't a BitCoin transaction require that a fee be offered to the Miner? And, the user waits an hour or so, sees if his transaction has been mined; if not, he resubmits offering a higher fee. It's to avoid that bother that most BitCoin "investors" use an exchange, giving them the worst of both worlds. Ask the customers of Gerald Cotten how they feel about BitCoin's oh-so-very-clever security.
Most currencies are based on something other than confidence - They are based on taxation.
And, when the trust in the government goes, and the economy goes, so goes that government's currency. The dollar does not have any actual intrinsic value. It's not like money is minted from precious metals anymore.
Central-bank money is based on more than just taxation. The FRB has committed to try to keep the dollar's value at 98% of the previous year's $1 consumer basket. (They do this primarily to support banks and businesses, not consumers. Obviously the 98% target may fall short, as it has in 2022.) Anyway, most dollars are held temporarily and funneled into land, houses, stocks, or interest-producing paper.
I'm as pessimistic as the next guy, and one day our grandchildren may say "Fiat money?? What in hell were they thinking of???" Dollars, euros, yen —maybe they'll all end up like the Bubbling Tulips in the 18th century. But you think BitCoins aren't a Bubble also? Let me sell you a bridge in Brooklyn.