The world has gone mad for cryptocurrencies. As I’m writing this, the price of bitcoin has started to recover, following a crash from more than $19,000 in mid-December to below $8,000 in the beginning of February.
The reasons given for this are many and varied, but the truth of the matter is nobody knows for certain. Now, if a traditional asset would show this level of volatility, no serious investor would touch the stuff. But bitcoin is a technology, and in the famous words of Arthur C. Clarke: “Any sufficiently advanced technology is indistinguishable from magic.”
Ransomware, cyber crime and environmental devastation
Computers have transformed the world; the pace of innovation is accelerating, and people are more likely to believe in something that would have sounded like a fever dream just a few years ago. If we have quantum computing and rockets that send cars to space, why not magical Internet tokens that can make anyone rich?
Full disclosure: after first hearing about bitcoin in 2012, I became a passionate advocate for cryptocurrencies. Back then, it was about clever mathematics, open source and digital anarchism. Bitcoin was going to take down the banks, liberate the people from the yoke of the government - and it had a cool origin story.
Instead, it became a tool for crime and deception. It’s not just about buying drugs online anymore: the recent ransomware epidemic was enabled by wide availability of cryptocurrencies, transactions which supposedly cannot be tracked (they can, but the process is complicated and expensive).
“Every Bison dollar will be worth five British pounds… once I’ve kidnapped their Queen.”
General M. Bison in Street Fighter
Recent strains of malware no longer seek to harvest personal data – instead, they repurpose unsecured devices for crypto-mining, once again making it easier for cyber criminals to be paid. Cryptocurrencies have enabled countries like North Korea and organizations like ISIS to circumvent regulated financial systems. And do I even need to mention the environmental impact of industrial-scale mining?
And yet, clueless bedroom investors continue to think it’s a great idea to sink their savings into that thing they heard about on the Internet. One of the reasons cryptocurrencies have spread like wildfire is the power of conversion: after buying their first bitcoin, owners turn into evangelists, since every bitcoin purchased by their friends, colleagues and social media contacts increases demand, supposedly driving the price upwards and increasing the value of bitcoins already owned. That’s the basic economic model, right?
Cryptocurrencies are far from harmless. Friends don’t let friends invest in bitcoin.
This article appeared in the February/March issue of DCD Magazine. Subscribe to the digital and print editions here: