Bitscam
You can make anything a currency. I've long advocated avocados, at least if there's a money collapse you'd still be left with something good to eat. A couple days ago, the NYT ran a piece titled, “How Trustless is Bitcoin, Really?” It should have been titled how trustworthy is bitcoin? The answer to that is simple, not at all.
The NYT report is based on a research paper done by a group of scientists. The paper completely shreds the popular myths floating bitcoin since its inception. The two most essential bitcoin myths discarded are that is decentralized and anonymous.
The paper is most amusingly titled, “Cooperation among an anonymous group protected Bitcoin during failures of decentralization,” immediately undermining bitcoin’s creator(s) contention that bitcoin was based on “cryptographic proof instead of trust.” The paper finds:
An accurate catalog of agents in the early bitcoin community by identifying pseudonymous addresses controlled by the same agent.
Sixty-four agents mined most of the bitcoin prior to parity with the US dollar.
Nearly all bitcoin addresses fall within six degrees of separation of the top 64 agents.
For this last conclusion, the prestigious group of scientists don't even credit Kevin Bacon.
The report then states,
“Bitcoin was designed to rely on a decentralized, trustless network of anonymous actors, but its early success rested on cooperation among a small group of altruistic agents.”
Altruistic, that’s one of the paper’s punchlines.
They add,
“These network properties have unintended privacy consequences, because they make the network much more vulnerable to deanonymization using a “follow-the-money” approach.”
So basically, the whole idea bitcoin is decentralized and anonymous is out the window, neither of which should be a surprise. All cryptography is eventually broken, and as the paper's authors say bitcoin is particularly “leaky.”
However, these conclusions seem a little beyond the paper’s authors themselves. They amusingly inquire, “Why would anonymous agents, possessing enough computational power to attack bitcoin on multiple occasions, choose to act altruistically again-and-again?”
They then conclude,
“Taken together, our findings show that extraordinary levels of cooperation are possible among groups of anonymous agents, even in high-stakes, real-world scenarios. Of course, we cannot rule out the possibility that other factors also contributed to the choices made by the bitcoin community.”
Well, one simple other factor, bitcoin is a massive Ponzi scheme. Why for any possible reason would the people first-in blow up a scheme making them millions if not billions of dollars?
It never seemed coincidental bitcoin was launched at the depths of the last financial crisis. I came to look at bitcoin as being the signal when the next financial crisis would begin. The biggest scams go down first. In the last six months, bitcoin dropped 70%, from $67,000 to $20,000! Raising the question which will be first to hit dollar parity: bitcoin, the Euro, or the Yen?
Bitcoin might be the first Ponzi scheme to spawn its own industry. In another article, the NYT states, “Crypto companies are laying off staff members, freezing withdrawals and trying to stem losses, raising questions about the health of the ecosystem." -- Phew! Anytime someone describes a supposed money system as an ecosystem, run!
The FT also chimes in with a couple amusing pieces. One states about the developing bitcoin ecosystem, "Consumers have flocked to these platforms because they typically offer interest rates of about 10-15 per cent on their investments." New money, new rates of return, why would you put your money in bank at 1% when you can get 10-15%?
In another piece, the FT writes,
"Celsius’s halt to withdrawals early on Monday was also a U-turn after it had spent several days rebutting accusations that customers could not make withdrawals. Chief executive Alex Mashinsky challenged critics at the weekend to find “even one person who has a problem withdrawing”.
Funny, funny stuff! Sounds like a bank to me. Everything new is old again. Where's Tim Geithner when you need him?