Cryptocurrency, blockchain should not be judged by Bitcoin

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Should we fear the crypto bubble bursting?, Apr. 23

Little is known of the origin of Bitcoin, the first cryptocurrency. Its creation is attributed to the pseudonym Satoshi Nakamoto, a person or group. Using blockchain technology, it enables trusted transactions between two parties without the need for banks, governments, regulatory agencies, to act as intermediaries. The first block of Bitcoin (and the only one to do so) has a message embedded, “The Times 03/Jan/2009 Chancellor on brink of second bailout for bank.” This is a newspaper headline referring to the British government bailout of banks after the 2008 Global financial crisis.

The first Bitcoin was valued at less than a penny. Today it sells for $50,000. At times, its value has dropped by 20 per cent in one day.

Satoshi is the largest holder of Bitcoin in the world. Should they decide to sell some or all of their one million bitcoins, the price would plummet. These are not desired qualities in a currency; actually they are preconditions for a financial bubble. An old yoga maxim states that “We become that which we hate.” It seems that, in a reaction to hypervalued financial assets, Bitcoin incarnated some of the flaws it was trying to correct.

Blockchain technology holds a lot of promise in promoting trust, transparency and accountability while reducing transaction fees. Many financial institutions and some governments are exploring and adopting this technology. Bitcoin is just the first, and flawed, implementation of that technology. As such it should not be used to judge or design cryptocurrency.

Moses Shuldiner, Toronto