Cryptocurrency is all the rage, and like many rages, a bad idea. The problem is not the blockchain technology it is built on nor free and open asset markets. Not even these silly non-fungible tokens (NFTs). My dislike is reserved for the digital currency that combines blockchain, the internet and cryptography to create a collection of unique digital files whose ownership can be easily assigned and transferred. People call it a currency. I’ll let economists argue why it is not. It is a fabricated asset. And one that is already causing problems that could get worse.
The lack of any inherent value is not my issue either. And I am not jealous of people who have made money from cryptocurrency. My dislike is driven by the greed it creates and its ability to keep transactions anonymous.
Two characteristics—no control over transactions and solving ever-larger sets of math problems on computers to earn coins—enable three things that can hurt individuals and damage society.
Ecological damage: This recently came to the general public’s attention when Tesla decided to stop taking the most popular cryptocurrency, BitCoin, because of the amount of electricity used to enable transactions and mine new coins. Since the whole scheme is set up as a race to reward whoever can solve a problem first, greed will drive people to spend more resources running and cooling computers.
Who’s left holding the bag? Value is only based on how much the next person is willing to pay for it, which is fine until you are the last person willing to pay a higher price. Greed is driving people to join the party, not really caring that at some point, someone else is going to end up losing a lot of money.
Black market economy: As the dream of widespread usage of cryptocurrency has increased, selfishness has enabled unfettered funding of truly evil activities. The recent massive increase in large-scale extortion by hackers would not exist without cryptocurrency. The shutdown of the Colonial Pipeline and the Irish health care system are a direct result of cryptocurrency.
Love it or hate it, the cryptocurrency genie is out of the bottle. More companies may adopt it as a form of payment, and the anti-establishment crowd will continue to delude themselves that it is a good thing. Meanwhile, the ecological and societal damage will continue. And no one will do much about it because there is simply too much money to be made.
Eric Miller is co-owner and principal of Tempe-based PADT Inc. In addition, Miller serves as Chairman of the Board for the Arizona Technology Council.
VISIT HERE to view the published article in the Phoenix Business Journal its entirety.
Visit www.aztechcouncil.org/tech-events to view all of the Council’s upcoming virtual tech networking opportunities, engaging virtual tech events and in-person tech events.