Bitcoin’s market capitalisation reached new peaks in November 2021. This column suggests it is hard to find arguments supporting the cryptocurrency’s current valuation. Even if the financial stability risks of a Bitcoin collapse could be contained, the burst of the bubble would imply painful losses for many retail investors and society at large. The authors conclude that public authorities should refrain from taking measures supporting additional investment flows into Bitcoin and should treat it as rigorously as the conventional financial industry to combat illicit payments, money laundering, and terrorist financing.
The durability, stability, and scalability of the Bitcoin network1 is impressive. And the potential of blockchain outside the areas of digital assets and finance has still not been fully explored. Still, several authors are raising doubts on Bitcoin’s underlying technology and concept (e.g. Avoca 2021, Acemoglu 2021, Bindseil, et al. 2022). The ‘proof-of-work ‘concept is a constituting feature of the Bitcoin system. It has a scalable difficulty level and aims to incentivise miners to keep the system running. The more computing capacity and the faster the validation process takes place, the safer the whole system will be. Still, the ability of the technology to keep up in a quantum computing environment is being questioned, and the governance of necessary in-depth changes has been made deliberately difficult. Moreover, the proof-of-work concept, which is a necessary condition for the security of the system, wastes power and is an environmental polluter without compare: Bitcoin may consume as much energy as all data centres globally (Digiconomist 2021).
— source nakedcapitalism.com | Ulrich Bindseil | Jan 10, 2022