My views about bitcoin and cypto currencies

I wish to share my views about bitcoin and cypto currencies.

When I learned that bitcoin was built on the blockchain platform, I spent some time to learn about blockchain. I formed the opinion that it is an inefficient platform. I shall talk about it in a separate post.

I met an expert in the blockchain platform. I asked him about the cost of processing a transaction using blockchain. He quoted a high figure that is not economically feasible. In defense, he said that the cost to come down with improvements in the algorithm. I am not optimistic.

There is another issue with cryptocurrency. The proponents said that it allows the participants to transact anonymously, without any oversight by a third party, such as the government.

I do not agree that this is an advantage. In my view, it is a disadvantage.

Why do I say so? It is clear to me that the cryptocurrency has to be stored in a database that is managed by the database owner.

In the past years, there were a few cases where the database had been hacked and the cryptocurrency (i.e. bitcoin) had been stolen. The technology did highlight that there was discrepancy and that the currency had been stolen.

What can be done about the theft? Who takes the responsibility?

If I am not mistaken, the database owner offered to get all the customers to share the loss from the theft proportionately. They are not able to take the full loss.

In fact, I have a strong suspicion that the theft of the cryptocurrency is an inside job. The people who were supposed to manage the database know how to conduct the theft and leave the losses to be suffered by the customers.

So, cryptocurrency does not increase security. It still carries its risk of theft and loss. It only improves the transparency.

Many people were excited about bitcoin, which is the best known cryptocurrency, because it has increased in value significantly. This is not a real value; it is a speculative value. It is a bubble, like so many other bubbles that occurred in economic history.

Many participants have started to create other cryptocurrencies in the hope that they will be as popular as bitcoin. They are called ICO, or initial coin offering. These new coins have not taken off. There were too many coins that dilute the speculative interest.

There is no justification for cryptocurrency. If you search Google, you will read many articles about the case against cryptocurrencies. Some of these articles were written by well known economists.

Here is one of them.
https://www.bbc.com/news/business-48852059

There may be a need for a currency to replace the US dollar as the medium for international trade. But the US will fight against it, as they do not want to lose the benefit that they now enjoy as the accepted reserve currency.

Here is my conclusion. There is no need and no place for cryptocurrencies. It will die a natural death.

 

Tan Kin Lian

 

 

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11 Responses to “My views about bitcoin and cypto currencies”

  • Jman:

    The efficiency is one aspect of this.

    The elephant in the room that is not adequately addressed or discussed is trust. There are 1,000,001 ways of manipulating and profiting from corporations and individuals who put their money in bitcoin and libra and transact using those platforms.

    Using traditional fiat money as an example, trust is much higher in Central Banks as they are far less likely to manipulate for their own benefit. But the same definitely cannot be said of banks and other intermediaries, and the list of ways they have manipulated for personal benefit over the past decades is far too long to discuss.

    And here we have proven liars like Facebook wanting to create and lead libra, which is to carry a weight pegged to a basket of currencies. And if there are enough trusting believers who are going to follow the seduction of these tech Pied Pipers, these Pied Pipers are going to take a little bit here and a little bit there for themselves.

    These Pied Pipers are intending to be Regulator and Market Player at the same time. This is the perfect recipe for wanton abuse. And the best part is that the Governments and thought leaders are nowhere to be seen to call out these dodgy people, who spend so much money on lobbyists to dress up their crooked schemes and hide behind sexy tech labels.

    The lack of leadership in this world of tech is a serious concern.

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  • TruBlu:

    Cryptocurrency will eventually be known as CRAPtocurrency,that,i am sure.

    Crappy ppl are iniating such financial medium to benefit from it.

    Time will tell.

    MONEY IS A FORM OF EXCHANGE,A MEDIUM OF EXCHANGE.
    As such,it should be properly REGULATED N MUST BE CONVENIENTLY N TRANSPARENTLY REGULATED.
    Else,what is it?
    It will just be as good as how your CPF gets CONfiscated???

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  • Darth Vader:

    Do you know WHY so many ICOs fail, especially in China? The REAL reason they fail? It’s because China is a SOCIALIST state, that’s why! This means that all those China nationals who cook up their own cryptocurrencies and come up with their own ICOs DON’T UNDERSTAND a fundamental fact about money, and that is MONEY IN ITSELF IS WORTHLESS!!!! Do YOU know WHAT actually gives money its value? It’s DEMAND, and demand in turn is fueled by PURCHASING POWER. And WHAT fuels purchasing power? ECONOMICS, that’s what! And that is WHY all those cryptocurrencies in China fail whereas Bitcoin and Ethereum are successful! It’s BECAUSE bitcoin and ethereum can be used as actually media for trade e.g. you can by a cake for maybe 100 or 200 satoshis, which in turn can be converted to your own local currency. And that is WHAT the advantage of cryptocurrencies is; you can use it to pay for purchases abroad without needing a credit card or changing money, as long as there are merchants who will accept them, whereas the same CANNOT be said of the Chinese cryptocurrencies, a huge majority of which are scams anyway!!!!

    Go on tkl, keep posting all your drivel and lunatic ravings here. The more you post, the smarter you think you’re showing everyone you are, the more you’re PROVING to everyone exactly HOW STUPID AND IGNORANT YOU REALLY ARE!!!!

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  • Rabble-rouser:

    “Gold Chain” Tan very prolific contributor to TRE but?…….

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  • MarBowling:

    When SHTF, the next GFC will be termed as the Mother of all GFCs….there will be massive financial panic, disruption, riots and chaos all over the world! Fiat monies esp the US$ and all those crypto currencies will become worthless. By then in order to be able continue to “trade” with each other for goods and services, we have to use Kin Lian or Golden Chain as a form of payment! Wah lan, our friend Tan Golden Chain overnight will become an exclusive and valuable “product”. Every time he wants something or to buy something, he just flashes his smile and announces his GREAT Name, he will get it instantly! LOL!

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  • @ Darth Vader:

    Please hightlight to TKL , how many ICOs failed in Panda country. He seems unaware.

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  • Darth Vader:

    “Please hightlight to TKL , how many ICOs failed in Panda country. He seems unaware.”

    Far too many. Easily 50 or more. I stopped counting after 25. On a personal level I know of 1 where the coin flopped after being listed because nobody traded it, so the lady who put it up approached my friend to sponsor a project that would create a market for it.

    Then she chickened out after realizing we were dead serious about doing the project and not just running a get rich quick scam!!!!

    Then there was another clown who was unhappy that we were running a serious project and not a get rich quick scam that could result in our foreign partner going to jail when he’s entirely innocent, so we called off the partnership.

    Then there’s the case where the government cracked down on a legitimate business where the company deals in its clients’ credit ratings and use of credit. Why, maybe tkl himself may know since he claims to be the expert on everything. Personally, I think winnie the pooh isn’t happy that his family may be on the list
    And then there’s this case:

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  • Bapak:

    Whoever wants the business to collapse should hire the famous Kim Jung-Un impersonater in Singland, who happen to be a General with many-many-zeros-behind working experience.

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  • Harder Truths:

    Not everything is about money TKL.
    Sometimes ideas need a vehicle.

    Blockchain itself is a beginning of a new way of decentralising the world, not an end in itself. You can ignore what they represent but then again I expected no less.

    There are thankfully enough smart people in the world that don’t need your beads and rattles.

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  • Govt Reining In:

    Crytocurrencies will allow transactions to be more efficient in the digital economy, bypassing banks which in turn will reduce the effectiveness of governmental control and regulation.
    This is the reason why it has not been accepted in countries where government practices interventionist economy such as China and Singapore.

    Value of Bitcoin tanked in China because the communist government banned it, as it was used to overcome currency control by state. Many people has been trying to move funds out of China for financial security.
    The CCP has been stepping up measures and further preventing the massive outflow of funds from China since 2015.

    Other than the issue of regulation, wider adoption could only happen with Trust and acceptance as currency. Big companies such as Amazon, Facebook and Google are in very good position for the push and each has been developing their own crytocurrency, which brings in the question of who will be the checker in this system when there is a dispute, just like the case for and against censorship in the social media, who is responsible for what.
    The law will have to be updated.

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  • Jman:

    @ Govt Reining In

    This is all very exciting if we put small money into Bitcoin and their likes.

    But when you put large sums, life savings, large corporation deposits, it is an entirely different matter.

    So the big question is who you would trust – (1) a Govt which is theoretically not set up to profit from you; or (2) Amazon/Facebook/Google which are set up to profit from you to the maximum extent for the benefit of their shareholders? You can read the fine print today, but you can be sure Tech will change the fine print so much so often that they will take your money to the maximum extent the law currently allows.

    Those of us who would even entertain the thought of placing large sums with Tech are very seriously misguided.

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