Matt Damon is among a number of celebrities lending their fame to cryptocurrencies. Photo / Supplied
Matt Damon is among a number of celebrities lending their fame to cryptocurrencies. Photo / Supplied
OPINION:
For perfectly logical evolutionary reasons every right-minded person wants to get rich without actually doing anything. This, together with volatile stock markets, rising inflation and a lack of foreign holidays to blow our cash on, mean that shovelling money into cryptocurrencies has become an increasingly popular pastime. Is thisa prudent way to take advantage of the future of money? Or a futile attempt to get on a wagon that is already through the lights and past the next McDonald's?
Although everyone's heard of cryptocurrencies, nobody I've met ever seems to actually understand how they work. Luckily I am well placed as a guide in this important area as not only can I operate a personal computer, but I also spent several years working in a casino. Both play their role in getting a reasonable grasp crypto for anyone without a Nobel Prize in "The Economic Implications of Blockchain For Financial Gain".
If you'd put a decent chunk of change in Bitcoin in 2005 you would undoubtedly have made a lot of money. Similarly, if you had bet on all the winning horses at Ellerslie over the same time you could have retired to a small villa in Ponsonby. Financial decisions, like most of life, are a lot easier in the rear-view mirror but just because something has done well in the past does not necessarily mean it will do well in the future. Just ask the England cricket team. Or anyone who bought tulips in 1636.
Power guzzling
The idealistic view of cryptocurrencies as a sort of hippy alternative to government-controlled currencies is somewhat tarnished by the ridiculous amount of power they consume. For some reason beyond my limited level of understanding every single Bitcoin transaction (say, buying a coffee) uses up enough energy to power a family house for six weeks. Bitcoin as a whole uses up more energy than Finland each year. If everybody used Bitcoin the way we use dollars, the world's energy grids would crash before you can say "don't worry, Doge Coin's up 5 cents this week!".
Caveat Emptor
Maybe it's just me, but I found it slightly worrying that the country with the most Google searches of "Bitcoin" turns out to be Nigeria.
Similarly perturbing was the Yahoo Finance article titled: "Seven of the biggest Bitcoin crashes in history". One crash is unfortunate. Seven looks like extreme carelessness.
There are a few storm clouds forming over the house that crypto built. Photo / Getty Images
Another issue is the millions of dollars that disappear annually when careless crypto holders forget their passwords. The money just disappears forever into the black hole it came from. Sadly they don't reset your password, not even if you tell them your first pet's name was Satoshi Nakamoto.
There are two groups of people that are forever banging the drum for crypto: Firstly, the hundreds of crypto exchanges whose sole source of income is from your transactions. Crypto exchanges seem to be aimed at "bro" investors and advertise as being "backed by Kevin Durant and Odell Beckham Junior" as if having B-grade sports stars as shills provides some kind of financial legitimacy.
The other group of supporters are those who have already bought in and desperately need the rest of us to jump in to raise the price of their own holdings. It's unlikely that either group will give you a balanced view.
As much use as a one-legged man in a butt-kicking contest
While some companies will accept cryptocurrencies as payment, often just Bitcoin, this is still relatively uncommon. The people who most use crypto are often criminals who find it handy for transnational money movement without having to go through pesky banks who are obligated to report such transactions. The growing number of companies held to ransomware are required to pay in cryptocurrencies, which for some reason often ends up in Russia.
What will the governments do?
The Chinese Government has already moved against cryptocurrencies, declaring them all illegal, banning their production and introducing a state-controlled alternative.
As other governments become increasingly irritated by criminals walking off with ransomware proceeds in crypto, it would not be surprising to see further controlling action taken. Cryptocurrencies threaten the position of the world's currencies, particularly the hegemony of the US dollar. This is unlikely to be popular with the US Government which uses monetary policy as a key method of controlling the economy.
FOMO
Undoubtedly, the most logical reason for putting money into crypto is FOMO as we all live in dread of our friends making pots of money while we miss out. Therefore, if you'll excuse me, I'm just off to ask my advisor which cryptos I should be looking at this week. Who knew Matt Damon knew so much about blockchain?
