Munger "I don't welcome a currency that's so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air."
As one of the most respected figures in the financial industry, he doesn't need to say this argument in public. Why he tried to fight against all these bitcoin or 'fin-tech supporters?
Firstly, a question that needs to be asked is: is bitcoin a currency? It is a cryptocurrency, and it supports transactions in real as well. However, bitcoin fails the primary purpose of being a currency which to transact purchases and sales.
The amount of bitcoin being transacted is limited. Bitcoin is built upon its core technology – blockchain. However, blockchain is born not to support large-scale transactions that happen at the same time. A 'block' will be created for every ten minutes containing around 2000 lists of transaction information. That is too limited to support real-life transactions. Besides that, its transaction fee is significantly higher than normal currency.
Come back to what Munger said. It is about another prominent feature of blockchain – anonymity. All the transaction under blockchain is not trackable. Sometimes we may experience credit card fraud and we can call our bank, verify it and refund the money. However, that will be impossible for bitcoin. Once a transaction is completed, it's gone. There will be no protection for making mistakes, or your bitcoin wallet got stolen.
Also, money laundering is a serious problem because criminals use this as a new tool for disguising their illegal gains. The internet that we can get access to is only a small part of the whole internet world. People call the rest of the internet – 'The dark web,' which is mainly filled with crimes related to drugs and kidnapping services.
In this case, cryptocurrency like bitcoin has very limited intrinsic value in our daily life. The reason why it becomes so heated in discussion is that its investment value. In other words, I prefer to call it speculative value. Speculators from all over the world are attracted by its high fluctuation. Though the total amount of bitcoin is not going to change in the future, which means its price is supposed to be rising all the time, a crypto trading platform like Coinbase can potentially divide one bitcoin into millions of shares so that buyers can afford it. Then, the total number of bitcoins becomes a joke.
Comments