I am hardly aware of a topic that the people of the people are currently dividing as strongly as Bitcoin. On the one hand, the self-proclaimed toxic Bitcoin maximalists, who see the answer to all problems in the world after the mantra "Bitcoin fixes this" (Bitcoin repairs this). On the other hand, some "IT-Lers" warn that Bitcoin will destroy the world and must therefore be stopped. If I speak to journalists, I often hear that they prefer to avoid the topic because of the diffuse information situation. However, a balanced debate is extremely important because of the potential emphasized by the supporters and the weaknesses mentioned by critics.
Bitcoin is the oldest and most significant cryptocurrency on the market. This is a monetary system that functions independently of states or central banks.
The decentralized structure of Bitcoin is similar to that of the World Wide Web: there is no central unit on which all data is stored and which can control the content. As a result, it is extremely unlikely that Bitcoin will disappear again in the foreseeable future. Politicians in both Europe and the USA have recognised this. However, there is a lack of a balanced and broad public discourse on how we as a society would like to deal with such a monetary system – and what problems and potentials this entails.
Accordingly, my hope was great when the science journalist Mai-Thi Nguyen-Kim, known for her interest in social issues, dealt with the topic of Bitcoin on October 16, 2022 in her ZDF program »Maithink X«. The piece is impressed by the nerdy style typical of Mai-Thi Nguyen-Kim, in which she initially explains money, money creation and finally Bitcoin as an alternative and decentralized money system.
At the end of the show, Nguyen-Kim explains why she does not think Bitcoin is a good alternative. Even if her points of criticism are quite appropriate, she has underpinned them with not quite accurate examples and also illuminated them one-sidedly. Since some people probably share their concerns, I would like to take up the debate that has been initiated and explain where I see the problems of the cryptocurrency and why – taking into account the counter-arguments – I still think Bitcoin is currently useful.
Neutral is not necessarily better
Because Bitcoin is a decentralized system, some cannot control it - it is therefore completely neutral. Even if many people are more positive about the word "neutral", neutrality should be seen as exactly what it means: neutral - and therefore neither positive nor negative. Nguyen-Kim explains that this is not necessarily desirable for a currency.
This is illustrated by examples from the history of Bitcoin. For example, in 2010, a year after the cryptocurrency appeared, the organization Wikileaks used Bitcoin to respond to the blocking of its accounts by PayPal and still be able to receive donations. Whether this is good or bad is in the eye of the beholder. For example, the inventor of Bitcoin emphasized that he would have liked the media attention at the time in a different context and compared the actions of Wikileaks with the kicking of a hornet's nest. Edward Snowden also recently noted in a lecture that he had paid for the server infrastructure for his NSA leaks with Bitcoin.
In addition to such explosive and frequently controversial examples, Bitcoin critics clearly lead negative problems that arise from neutrality: According to Statista, the number of ransom payments that have been successfully blackmailed with Bitcoin (and other cryptocurrencies) since 2013 have been successfully blackmailed by ransomware attacks since 2013 almost monotonous. Such crimes, which in particular use insufficiently secured IT systems, are favored by a neutral technology such as Bitcoin, since no judiciary can interrupt or reverse the payment transactions.
It is precisely this property that proponents of Bitcoin, on the other hand, see as a powerful tool for the separation of powers: If (central) banks could not intervene in payment transactions or control the money supply in the first place, this would limit their power – which would reduce the risk of corruption and abuse of power.
Decentralization leads to a shift in power
Next, Nguyen-Kim comes to a further consequence of decentralization: Since nobody is specifically in charge, interest groups can influence the exchange rate of cryptocurrency for their purposes. The science journalist calls the entrepreneur Elon Musk, who has triggered the supposedly fluctuations of value from Bitcoin and other cryptocurrencies. Yes, Musk may have a certain range, but his actions play a special role for Bitcoin and its development. His statements briefly influenced the exchange rate, but that had no long -term consequences. The same happened with Tesla shares when Musk joked publicly on April 1st that his company was bankrupt. The course fluctuations say nothing about whether Tesla is an economic company - or whether electric cars are generally beneficial for the future of the world. It is also the case with Bitcoin: Judging by the actions of Musk about how useful Bitcoin is, the entrepreneur has a completely exaggerated meaning.
The question of whether the power lost by central banks and states in a Bitcoin world shifts to another place seems more exciting to me. For example, the further development of cryptocurrency could be influenced. Because Bitcoin is not a static system, but is constantly improved by updates. But how can a decentralized system be updated at all points if, for example, a security vulnerability is discovered? In such cases, it becomes clear how decentralized the technology actually is in its decisions. For example, some developers seem to enjoy trust in the Bitcoin community, which is why security updates recommended by them are widely accepted.
In 2018, some developers were informed about a critical bug in the system. If the weak point had been made public, attackers could have taken advantage of it. Therefore, a small group of developers in cooperation with a few miners repaired the bug and successfully asked the network to update the software under a more harmless pretext. This was possible because the developers have trust. And they did not abuse this in this case either, because apparently there is at least an implicit consensus regarding such understandable actions. As a result, the developers have a certain power, but this can also be withdrawn at any time-the users only have to reject the proposed software updates.
Does Bitcoin ultimately need trust?
Who enjoys the trust of whom in Bitcoin also plays an important role in another point. Because a crucial feature of the cryptocurrency is that you can check – at least in principle – its functionality and the correctness of the logbook. This is in contrast to our current monetary system, which is based on trust. Of course, it is completely legitimate to believe in the state and society to the extent that one agrees with their power over our money – and therefore considers Bitcoin unnecessary. However, not all people share this attitude. Some want to decide for themselves who to trust and why.
However, Nguyen-Kim and others criticize that trust is not required only in the theory of bitcoins. In practice, it is too complicated for most people to check the functioning of the cryptocurrency itself, which is why one ultimately has to trust a service provider or the software used.
Whether transparency in principle is sufficient is not a Bitcoin-specific question, but appears in many areas. Nguyen-Kim herself notes in an interview on her YouTube channel that although her editorial team shares specialist articles among the videos, very few people are able to check their content. Rather, it seems to be content with the fact that it is possible for experts. Why should you have a different claim with Bitcoin?
Nguyen-Kim clarifies her reasoning using the example of the bankruptcy of the lender of cryptocurrencies "Celsius", as a result of which numerous people have lost a lot of money. To justify the trust issues with Bitcoin with the disaster of Celsius is fundamentally wrong from my point of view. After all, it was not the fault of the US dollar or the euro that Lehman Brothers went bankrupt.
As with the downfall of Lehman Brothers, the Celsius case - as well as comparable incidents - shows that Bitcoin works as a monetary system: In the incident, customers - or the service providers - have speculated and gambles the money. In contrast to the banking crisis, the losses were not associated. Instead, people have to live with the consequences of their actions, trust and gamble. After all, nobody was forced to give Bitcoins to Celsius to get additional returns. The question is much more likely to be whether you need better consumer protection that enlightens people about the dangers that go hand in hand with such service providers.
In another point, however, Bitcoin is definitely dependent on trust: You have to trust that enough other people want to use the system in this form. However, this applies to any means of payment. Historically, we have seen currencies lose people's trust and crash as a result.
Despite the technical hurdles and the sketched dangers that interest groups could influence the technology of cryptocurrency in their sense, I see a democratic tool in Bitcoin that strengthens the separation of powers and, through its optional offer, is an important alternative to our existence, on humans can change if necessary. Accordingly, I say: "But Ms. Nguyen-Kim, of course free and self-determined humanity needs a technology like Bitcoin!"