From Hype to Scam: Bitcoin is and remains a scam

From Hype to Scam: Bitcoin is and remains a scam

 

Bitcoin is more widespread today than ever before. However, this does not change the fact that the cryptocurrency is just a large-scale scam. Caution, opinion! […]

Bitcoin is more popular than ever: companies such as AT&T, Microsoft, Visa and PayPal accept payments with the cryptocurrency. Even small businesses have long jumped on the bandwagon: according to an HSB survey, a third of medium-sized companies in the USA now accept Bitcoin and co. as a means of payment. If you are speculating with the cryptocurrency, this is certainly good news. For me, it’s just proof that a sucker is born every minute.

Bitcoin was just a scam from the beginning. Of course, the idea sounds tempting at first: Bitcoin as a decentralized, digital currency that you can trade directly via a ledger secured by the blockchain, instead of relying on tried-and-tested fiat currencies and banks as intermediaries. The value of Bitcoin is created by cryptographic calculations and seems independent of politics and governments. In fact, in the end, Bitkom is also about agreements and trust.

What’s wrong with Bitcoin and Co.? Robert McCauley, a senior fellow at the Global Development Policy Center at Boston University, recently explained it in an article in the Financial Times entitled “Why bitcoin is worse than a Madoff-style Ponzi scheme” as follows: “Equating Bitcoin with a ponzi scheme would be a compliment to the ponzi scheme.” In contrast to the notorious Ponzi scheme a la Bernie Madoff, Bitcoin is not bought for wealth creation, but as an eternal zero coupon bond. In other words, no one guarantees you a return on your Bitcoins. Their value is completely at the mercy of free trade. This raises the question: what happens if no one wants to buy Bitcoins at any price anymore? The answer: Bitcoin could become worthless overnight.

According to McCauley, Bitcoin is equivalent to a “Pennystock pump-and-dump scam scheme”. Pump and dump refers to a strategy of financial fraudsters who acquire more or less worthless shares, revalue them with invented stories, and then resell them. Often the course developments are astronomical before a crash occurs at some point. Those who still sit on the shares then pay the bill.

Just like this scam scheme, Bitcoin also exploits the greed of investors. In addition, there is the so–called FOMO (Fear of missing out) – the acute fear of missing out on a million-dollar opportunity. After all, the trend is propagated by friends, acquaintances or influencers. The value of Bitcoin is based solely on hype and hope. If both are lost, the cryptocurrency is worthless.

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Bitcoin and other cryptocurrencies have already been hit by many price slumps – most recently in January 2022. As I write these lines, the Bitcoin price is gradually picking up again, but how long will it stay that way? Will the all-time high from November 2021 ever be reached again? No one knows the answers to these questions. The only thing that is certain is that – as with any scam – you can also make money with Bitcoin. So if you joined in 2017 or before, you can still benefit. Otherwise, the chances are rather poor in my opinion.

This was never thought of: Satoshi Nakamoto, the mysterious inventor of Bitcoin, wanted to create a medium for daily transactions with the cryptocurrency and establish an alternative to the traditional banking infrastructure after the financial collapse of 2007 and 2008 (PDF). The plan did not work out: today you can use Bitcoin here and there for payments, but basically it is above all a risky investment gamble.

If that were all, it would not be so bad at all – people bet on boxing matches, horse races and poker games. So why not also on Bitcoin? The problem is that the Bitcoin favors crime. The cryptocurrency often makes cybercrime possible in the first place. For example, without Bitcoin and other digital currencies, ransomware would be much less common. The concept of cryptocurrencies allows criminal hackers to collect huge ransom amounts while remaining anonymous. In addition, “Cryptojacking” is the new “hot shit” when it comes to malware. So becoming active as a cybercriminal is actually a way to get rich with Bitcoin.

In addition, Bitcoin is also a first-class eater of electricity. The mining of the cryptocurrency consumes about 91 terawatt hours of electricity annually. That’s more than Argentina, with its 45 million inhabitants, consumes in one year. And the need for energy continues to increase every day. This is partly due to the idea that you can successfully mine Bitcoin from home. However, this has not been realistic for years: powerful GPUs are no longer sufficient to mine a Bitcoin proof-of-work. This requires computers with application-specific integrated circuits (ASICs). Such systems cost a lot and run around the clock.

Very revealing in this context is the result of a recently published study, which revealed that only 0.1 percent of all Bitcoin miners account for half of the total mining capacity. These are the ones who really make money, because they were there from the very beginning. If you weren’t, there is a good chance that you will eventually lose your last shirt with Bitcoin and Co. This may not be a popular view – but it may make one or the other think and save massive financial losses in the end. (fm)

This article is based on an article from our US sister publication Computerworld.

*Steven J. Vaughan-Nichols writes for our US sister publication Computerworld. He was already dealing with business and technology when 300bps was still high speed.

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