By Ariel Costas - August 31, 2021
Many people see Bitcoin (the cryptocurrency) as the future of finance, in replacement for the banking system. While some of their points are right, Bitcoin continues having problems, which are solved by other coins. Those problems might and will be exploitable by governments, corporations et al.
The first problem with Bitcoin (and many other cryptocurrencies) is it’s highly volatile, which means prices vary a lot on a same day. These prices can be also manipulated with certain news, or even Twitter posts. If we don’t trust the US Dollar or the Euro because a central bank can change its value whenever they want, how can we trust billionaires don’t do the same?
Elon Musk changed his bio on Twitter to “#bitcoin” and made it spike a 20% it’s value. When Tesla announced they wouldn’t accept Bitcoin anymore due to environmental concerns, the price dropped a 12%. When China regulated mining, the price also dropped a lot.
If bitcoin is about decentralization, we can’t let some guys manipulate the value of everything (in a world where BTC is the only used currency) with just an article or an interview.
Bitcoin is not private
Many people associate for some reason security with privacy. Bitcoin can be secure (or not), but it’s not private. Every time you operate from your wallet, that transaction is fully saved in the Blockchain forever. You can say “well, but they don’t know WHO I AM”…
Most people buy their crypto in exchanges, where they are 1. required to identify themselves with an ID, also known as KYC; and 2. pay with a bank account or a credit card. This data can’t be faked or hidden, it’s the banking system. Of course, you could buy on a “Crypto-ATM” and pay with cash, but then if you pay even once with that money and identify yourself, anyone can know who that wallet belongs to.
Let’s say Alice buys 1 BTC paying cash, and she then buys online somewhere that accepts Bitcoin, and adds her address to get what she bought sent there. Congrats, now the store (and probably the government) knows that wallet belongs to Alice.
Proof of Work
Proof of Work is a consensus algorithm done through the use of processing power. For Bitcoin and other crypto using SHA-256, among other algorithms there exist specialized machines called ASICs, which are used for mining. This is a problem, because they can mine faster than a normal computer, so only those who own an ASIC can mine Bitcoin.
PoW also has the environment problem, as the electricity consumption is huge. An estimate by the University of Cambridge talks about more than 178TWh, above countries like Argentina or Sweden. If this electricity comes from methods like coal, the carbon footprint it has is huge.
Also, thanks to how it works, those that can afford a lot of ASICs are the ones in control of the network, and they can do whatever they want. Everyone’s money is in danger nowadays thanks to central banks, do we want to solve the problem or to move it to a few miners having all the power?
There’s no perfect way of solving all these problems, but Monero is quite close. Wallets and transactions are totally protected: the sender’s address is grouped with other addresses, with Ring Signatures; the transaction amount is hidden with RingCTs and recipients are hidden thanks to stealth addresses.
It also prevents industry-level mining with ASICs, thanks to the RandomX proof-of-work algorithm, which allows ANYONE with some disk space to mine on their computers.
This anonymity and security makes government agencies like the IRS shit their pants, because they can’t control the money anymore. That’s why the IRS posted a $625.000 bounty for whoever could develop tools to help tracing Monero. And why they are playing the FUD game saying “Monero is used by criminals”. You know what? I trust it even more for that reason. If criminals successfully hide what they do with Monero, it means anyone can do it. Also, the USD and EUR are used for criminal activity too, you idiots.
#privacy #freedom #money #cryptography