My opinion on blockchain

Posted on 2021-02-07 byVlad Călin

This post was inspired by a question on Reddit: How much of your investment portofolio is crypto?

Well, my answer is 0%, and it will remain 0% forever.

I don't see the value in it, and the people who advocate for them are hypocrites: they say they get into crypto as a rebellion act against the current FIAT system that is controlled by governments, while day-dreaming about selling it for a huge profit (in FIAT currency). Every advocate promotes holding, which is not what a currency is for: currencies are meant to be a medium of exchange and to change hands.

Also, I see rampant misunderstanding of basic economics in people who advocate for it:

  • they say that the fact that it is deflationary and can not see inflation is a good thing, when it is actually a bad thing. There is a reason the target inflation is at ~2% almost everywhere. We need inflation to keep the economy going.

  • they say that it's a currency, when it's not. It is not accessible to everybody (not everybody has access to internet).

  • if you lose your key, you lose the access to your wallet for good and nobody can help you. People seem to not understand how bad this is. Imagine people losing everything because of one silly mistake.

  • Volatility is the enemy of any economy market: we need stability and predictability to avoid mayhem: businesses need predictability to prepare their stocks, factories need predictability to produce goods, people need predictability to budget and make long-term plans. Sure, long term plans usually don't go as planned, but you don't want to rethink your entire strategy on a weekly basis because of some wild fluctuation (this week a car costs 0.5BTC, next week it will be 5BTC). Because of volatility you can't even save for the future.

Also, as a technology, blockchain itself it's not that impressive. At its core, it is a decentralized slow read-only database which needs as lot of power to run, which do not have many real-life useful applications. Yeah, some would argue that having a decentralized zero-trust database would be an advantage, but I am yet to see a system using blockchain, where a normal database is not enough.

The only real-life application I could see is in audit trailing, where the decentralization part is useless (only the chaining of blocks by hashing is useful there, to avoid tampering with past entries), but that use-case is not related to the reason blockchain advocates promote it.

Every time some company announces that they will build their own blockchain solution, the blockchain community celebrates, because they consider it to be proof that blockchain is the future, but in fact, it's a massive counter-argument against the core belief they promote: decentralization. The fact that a company is building their own, it means that they will control it.

Conclusion

In my opinion, Bitcoin is a fad and it's value is given by two things: people who have too much faith in an asset that is not really an asset and has no use except offering a field for speculation, and the FOMO of people who get caught in the heat of the moment and buy when a friend tells them to buy or mass-media brings it to the public attention once very few months.

This article is a personal opinion, and represents no financial advice. I am in not saying "sell" or "buy". Do your own research (thoroughly).