By some estimates, the Bitcoin network consumes as much energy as entire countries like Argentina and Norway, not to mention the mountains of electronic waste from specialized machines used for such mining operations that burn out rapidly. Transactions are processed by “miners” using massive amounts of computing power in return for rewards in the form of Bitcoin. Securities that enable speculation on Bitcoin prices are already regulated, but there is not much more the government can or ought to do.īitcoin is not innocuous. The government should certainly caution retail investors that, much like in the GameStop saga, they act at their own peril. As with any speculative bubble, naive investors who come to the party late are at greatest risk of losses. Banks have mostly stayed on the sidelines. Bitcoin investors seem to be relying on the greater fool theory-all you need to profit from an investment is to find someone willing to buy the asset at an even higher price.ĭespite their high valuations on paper, a collapse of Bitcoin and other cryptocurrencies is unlikely to rattle the financial system. But scarcity by itself can hardly be a source of value. Bitcoin devotees will tell you that, like gold, its value comes from its scarcity-Bitcoin’s computer algorithm mandates a fixed cap of 21 million digital coins (nearly 19 million have been created so far). It has no intrinsic value and is not backed by anything. While Bitcoin has failed in its stated objectives, it has become a speculative investment. The government’s success in tracking and retrieving part of the Bitcoin ransom paid to the hacking collective DarkSide in the Colonial Pipeline ransomware attack has heightened doubts about the security and nontraceability of Bitcoin transactions. Moreover, it has become clear that Bitcoin does not offer true anonymity. It is as though your $10 bill could buy you a beer on one day and a bottle of fine wine on another. Bitcoin’s unstable value has also made it an unviable medium of exchange. It takes about 10 minutes to validate most transactions using the cryptocurrency and the transaction fee has been at a median of about $20 this year. While Bitcoin’s roller-coaster prices garner attention, of far more consequence is the revolution in money and finance it has set off that will ultimately affect every one of us, for better and worse.Īs it grew in popularity, Bitcoin became cumbersome, slow, and expensive to use. It powered the shadowy darknet of illegal online commerce much like PayPal helped the rise of eBay by making payments easier. This made Bitcoin the preferred currency for illicit activities, including recent ransomware attacks.

Bitcoin enabled transactions using only digital identities, granting users some degree of anonymity. Its emergence amid the global financial crisis, which shook trust in banks and even governments, was perfectly timed. Are cryptocurrencies the wave of the future and should you be using and investing in them? And do the massive swings in their prices-nearly $1 trillion was wiped off their total value in May-portend trouble for the financial system?īitcoin was created (by a person or group that remains unidentified to this day) as a way to conduct transactions without the intervention of a trusted third party, such as a central bank or financial institution.

Bit coin in us dollars