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Bitcoin – not with a barge pole

February 16, 2019

I have no sympathy whatsoever with the investors who stand to lose millions of dollars because they hey were foolish enough to trust some guy to make sure the password to the bitcoin accounts he ran on their behalf was available to be used in the event that he died. He duly did die, of course.

The possibility of discovering the password, and unlocking the accounts, appears to be remote. This is the equivalent of taking a large treasure chest and chucking out of a boat into the deepest part of the Atlantic.

I also have no sympathy with the investors because a bitcoin is modern equivalent of a share in the South Sea Company. In other words, bitcoins are a bubble. Bubbles create notional wealth out of little more than a basic facet of human nature – the fear of missing out. Most people who invest in bitcoins do so out of fear, greed, or both. Companies who use those levers to manipulate people into bitcoins should be ashamed of themselves.

As for blockchain, the technology bitcoin, I’ve yet to be convinced of any benign application when most people who use it do so to buy and sell stuff like child porn, fentanyl and AK-47s on the dark web.

The idea of being able to carry out secure transactions sounds fine. We all want to avoid Russian hackers making off with our life savings by hacking into our banks or mobile phone providers. But when those transactions come with unbreakable security, we seem to opening up a new avenue for corrupt presidents to pay off their girlfriends, or princes to reward assassins with impunity. It’s also a potential money-launderer’s paradise.

The whole bitcoin world is so opaque that we don’t even know who invented the technology. It seems to me that in these times of shadowy forces doing despicable things, we need more transparency, not more fog.

If Robert Mueller and his team were unable to use the classic FBI tactic of following the money, their investigation would have been wrapped up long ago for lack of evidence.

Nowadays it’s not just assassins and money launderers who are jumping on the cryptocurrency bandwagon. JP Morgan, whose boss 18 months ago denounced bitcoin as a fraud, is creating its own cryptocurrency. No doubt other financial institutions will follow. I suppose it’s unlikely that JPM will lose their passwords. But no doubt there are hackers out there who will be gleefully crawling through the wallets of the bank’s less diligent clients.

You might call me an uninformed luddite, but I worry that blockchain is a potentially lethal weapon most of us don’t understand, including governments. I see no sign of enthusiasm on the part of major economic powers to regulate this stuff. Until they create safeguards to prevent the malign use of crypto technology, then we should all be worried.

Given the snail’s pace at which the same governments are moving to prevent the political manipulation of social media users by unaccountable entities with money of dubious provenance, we can surely have no confidence that they’ll get round to regulating the use of blockchain and crypto-currencies at any time in the next decade. Unless, of course some crypto-genius sparks off the next financial crisis. In which case it’ll be too late.

In the meantime, I will be avoiding the technology as if it were the spawn of the devil.

From → Business, Politics, Social, UK, USA

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