In this interesting post ‘‘Black Swan’ author Nassim Taleb says bitcoin is an open Ponzi scheme and a failed currency‘, an interesting question is expressed about the true nature of cryptocurrencies and their future.
Cryptocurrency are highly volatile, which is an issue as to their actual usage: “you don’t replace the currency with something that’s so volatile that you can’t really commit to a transaction in it.” There is no doubt either that there is currently a lot of speculation on those cryptocurrencies, and as it becomes an increasingly public speculation with many people of all ways of life attracted to the scheme, it is certainly much overpriced and there will be a lot of disappointments in the near future.
The decisive aspect however I believe is the fact that cryptocurrencies are intrinsically difficult to control by law-enforcement and hence widely used by organized crime. This seems to be changing, and recent recovery of bounties paid in bitcoins after some hacking events, as well as increasingly stringent tax authority control, shows that it becomes much less safe as a way to hold money. However, such cryptocurrencies are not acceptable by governments in the long run because they are potentially economically destabilizing, therefore I don’t believe this will be sustainable particularly if independent cryptocurrencies volumes increase. In addition the ecological impact of cryptocurrency mining has become evident, as its impact on the semi-conductor market: cryptocurrencies don’t scale beyond a certain size without difficulties.
All in all, while government-backed electronic currencies will certainly emerge in the future, I am much less optimistic about the scalability and acceptability of really independent cryptocurrencies, and I believe that the current fashion may not last long. We’ll see what the future holds!
