Bitcoin
A new Bank for International Settlements (BIS) report betrays that central bankers are scared of Bitcoin. (Shutterstock photo)

(Heartland Newsfeed) — Since the dawn of cryptocurrency trading, there have always been projections and predictions of doom-and-gloom bear markets. From the amateur day trader to so-called market experts like Jim Cramer, they have all predicted that Bitcoin, everything that encompasses it and the entire cryptocurrency marketplace will collapse into the void in which it came from, or something to such effect. These same predictions also come from ignorant journalists and so-called hubristic economists who know nothing about cryptocurrencies, hence the longstanding compilation of so-called crypto obituaries penned by the strongly skeptical and completely clueless.

A recent attack from the Bank of International Settlements (BIS) — an institution which is owned by 60 of the largest central banks in the world — which is in itself a central bank. Principal economist Raphael Auer has released a new report stating that Bitcoin and other ‘proof of work’ (PoW) cryptocurrencies are inherently boomed because of the costs of transaction confirmations and miners leaving the marketplace after all block rewards are phased out.

Additionally, BIS general manager Agustín Carstens revealed himself as some kind of cartoon supervillain, mandating young people to “stop trying to create money.”

The ‘hashing is expensive’ and other red herrings

Auer claims that balancing security and speed among PoW cryptocurrencies have led to prohibitively expensive transaction confirmations, as stated in the following excerpt:

If the incentives of potential attackers are analysed, it is clear that the cost of economic payment finality is extreme. For example, to achieve economic payment finality within six blocks (one hour), back of the envelope calculations suggest that mining income must amount to 8.3% of the transaction volume – a multiple of transaction fees in today’s mainstream payment services.

If the paper was about particularly about the possible continued scalability of Bitcoin, then this could be a valid critique, but rather it claims that it presents an existential threat to cryptocurrencies like Bitcoin, which particularly makes zero sense at all. It doesn’t matter what it costs to make a Bitcoin transaction, because people will keep using Bitcoin regardless, which is apparently lost on Auer and BIS.

Auer also states the eventual phasing out of block rewards and claims that it will make mining prohibitive because high transaction fees may not make it worthwhile, leading to continued liquidity declines, this heralding the end of Bitcoin. He also goes on to state as a concession that second-layer solutions such as the Lightning Network could be utilized to improve payment security economics as well as the mitigation of scalability issues.

So, what is this actually about?

Why is one of the world’s central banking organizations going through all the trouble of research, drafting, editing and publishing a report on crypto that is light on facts and heavy on misinformation?

Here’s a better question: Why is this particular central banking organization pushing for the doomsday of cryptocurrency markets? So they want us spending our nearly worthless fiat currency on the stock market?

You can actually save time by not reading the entire report, as their reason is featured at the beginning of the abstract:

Methods other than proof-of-work could be used to achieve payment finality. But these might require coordination mechanisms, implying support from a central institution. Thus, the current technology seems unlikely to replace the current monetary and financial infrastructure. Instead, the question is rather how the technology might complement existing arrangements.

That’s in Auer’s own words, presenting the point of the report is to dispute that crypto can disrupt the central banking system, doing something more efficiently that what banks can accomplish. It presents nothing other the release of over 30 pages of assorted garbage compiled of all fluff and next to no factual information.

The central banking system is essentially hemming, hawing and clutching their pearls about the potential of low transaction fees and game theory reliability easily summed up in a Carstens saying, slightly paraphrased:

You damn kids! Stop trying to create money! You can’t do without us! You need us for our coordination mechanisms, our social coordination, and our collateralized mortgage-backed securities!

Actually, we Millennials can do without the central banking system. We’re the generation of crypto, realizing that our own fiat currency continues to be devalued by our own government by printing out new bills every day.

Crypto investors are not rocket scientists

Auer, Carstens and the BIS act as if investors of cryptocurrency are trying to turn lead into gold. (Although, it would be interesting to make that happen, if it was possible.)

BIS fails to understand that crypto growth did not come from some “medevial desire” to do such a thing, but rather the success that lies within its decentralization, the single entity which terrifies them the most.

For example, crypto has created a growing ecosystem comprised of freelancers, agencies, virtual assistants and remote workers in the Nigerian city of Lagos, where such work models were either non-existent or unworkable because of central banking, which unilaterally dictated what, how much and where value could be transferred.

Thus, the rise of cryptocurrency has turned the status quo upside down and created opportunities for highly-skilled individuals in underdeveloped communities and countries with wages commensurate to their skill level without having to move, this putting a dent into the system. Meanwhile, the central banking system continues to push their arbitrary restrictions on poorer nations, essentially keeping them in poverty.

In just over a decade since the first Bitcoin block was mined, crypto has changed lives and has transformed economies, something the central banks have failed to accomplish in the U.S. and abroad in over four centuries.

Cryptocurrency isn’t merely limited to clever coding or simply exists as a financial novelty, but rather a financial framework that takes power away from the hands of unseen, unelected bureaucrats which dictate the financial industry and makes that control accessible to anyone who can operate a computer or smartphone. As long as it remains accessible, cryptocurrency will never die.

Let me state this again: As long as it remains accessible, cryptocurrency will never die. Until the central banks realize this truth, their executives will keep making doomsday predictions that will never come to fruition.

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Jake Leonard is the editor-in-chief of Heartland Newsfeed. He is general manager of Heartland Internet Media Networks and an active contributor to four newspapers for Pana News Group. He also serves as chairman of Tri-Counties Libertarian Party and Capital Area Libertarian Party, deputy candidate recruitment director for the Libertarian Party of Illinois and as chairman/co-founder of the Libertarian Party Millennial Caucus.

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