Romans cleaned their clothes with urine
Twelve years on, cryptocurrencies play almost no role in normal economic activity. Almost the only time we hear about them being used as a means of payment — as opposed to speculative trading — is in association with illegal activity, like money laundering or the Bitcoin ransom Colonial Pipeline paid to hackers who shut it down.
Twelve years is an eon in information technology time. Venmo, which I can use to share restaurant bills, buy fresh fruit at sidewalk kiosks, and much more, was also introduced in 2009. Apple unveiled its first-generation iPad in 2010. Zoom came into use in 2012. By the time a technology gets as old as cryptocurrency, we expect it either to have become part of the fabric of everyday life or to have been given up as a nonstarter. […]
Yet investors continue to pay huge sums for digital tokens. […] Their collective value has, however, at times exceeded $2 trillion, more than half the value of all the intellectual property owned by U.S. business.
Why are people willing to pay large sums for assets that don’t seem to do anything? The answer, obviously, is that the prices of these assets keep going up, so that early investors made a lot of money, and their success keeps drawing in new investors.
This may sound to you like a speculative bubble, or maybe a Ponzi scheme — and speculative bubbles are, in effect, natural Ponzi schemes. But could a Ponzi scheme really go on for this long? Actually, yes: Bernie Madoff ran his scam for almost two decades, and might have gone even longer if the financial crisis hadn’t intervened.
Now, a long-running Ponzi scheme requires a narrative — and the narrative is where crypto really excels. […]
are cryptocurrencies headed for a crash sometime soon? Not necessarily. One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset. Gold, after all, suffers from pretty much the same problems as Bitcoin. People may think of it as money, but it lacks any attributes of a useful currency: You can’t actually use it to make transactions — try buying a new car with gold ingots — and its purchasing power has been extremely unstable. […]
It’s conceivable that one or two cryptocurrencies will somehow achieve similar longevity.
Or maybe not. For one thing, governments are well aware that cryptocurrencies are being used by bad actors, and may well crack down in a way they never did on gold trading.
The good news is that none of this matters very much. Because Bitcoin and its relatives haven’t managed to achieve any meaningful economic role, what happens to their value is basically irrelevant to those of us not playing the crypto game.
related { Whatever Bitcoin Is, It Isn’t Acting Like Money }
