The below editorial is from Bill Harris, Founding CEO of PayPal, former CEO of Intuit and Personal Capital. That’s all laid out there as his appeal to authority. He says something about Bitcoin that I’ve pondered but not come out and said since I’m not sure. He writes, “I’m tired of saying, “Be careful, it’s speculative.” Then, “Be careful, it’s gambling.” Then, “Be careful, it’s a bubble.” Okay, I’ll say it: Bitcoin is a scam.”
“Bitcoin is a scam”. There it is, hanging out there for all the world to contemplate. From the start I raised an eyebrow at the people who complained about fiat currency but went weak in the knees over Bitcoin. It seemed an odd love affair. One based, more likely on Bitcoin’s anonymity and government-free aspects than any actual value or contemplation over just exactly what Bitcoin was (1’s and 0’s). I find it telling that people seem to crave making gold coins that have the Bitcoin logo on them. They seem to long for something tangible to hold. That psychology is actually an important part of trust in money. Even if it is just paper, you can hold a good old greenback in your hand.
Harris goes on, “In my opinion, it’s a colossal pump-and-dump scheme, the likes of which the world has never seen. In a pump-and-dump game, promoters “pump” up the price of a security creating a speculative frenzy, then “dump” some of their holdings at artificially high prices. And some cryptocurrencies are pure frauds. Ernst & Young estimates that 10 percent of the money raised for initial coin offerings has been stolen.” That much is possible, but where he gets closer to how I feel about it is this, “A bitcoin has no intrinsic value. It only has value if people think other people will buy it for a higher price — the Greater Fool theory.” Bitcoin is literally just digital. Which is fine to a point. We live in a digital age. The previous age being the Plastic age, now we are in the digital age. All of the words I’m typing now are just digital. Everything I have written could vanish tomorrow and could not be recovered under certain circumstances. That would make me sad but would not destroy me. That’s okay to take that risk for a blog but is that really a risk worth taking for a currency or commodity?
I am glad that some people got rich off of Bitcoin. I do not begrudge them that at all. It just wasn’t for me. I’m not a gambler and I see Bitcoin as gambling, an attempt to get more for less or something for nothing. But in all such schemes the end product can very well become nothing for something with that something being your hard-earned savings.
Bitcoin is absurdly wasteful of natural resources. Because it is so compute-intensive, it takes as much electricity to create a single bitcoin — a process called “mining” — as it does to power an average American household for two years. If bitcoin were used for a large portion of the world’s commerce (which won’t happen), it would consume a very large portion of the world’s electricity, diverting scarce power from useful purposes.