PYMNTS Talk Back: The Bitcoin Breakdown

29. October 2017.








Whether it was a bit of prescience – or perhaps a bit of prompting – we had a feeling that we might hear from the ecosystem after Karen Webster’s argument for just saying bye-bye to bitcoin.

Bitcoin, Webster argues, is likened to the invisible fabric sold to the emperor in the Hans Christian Andersen fable, “The Emperor’s New Clothes.” For fear of being shamed publicly, no one is willing to speak up and acknowledge that there’s no real “there-there” when it comes to its use as anything other than the currency of crime and speculation – even though deep down, they know that the emperor has no clothes.

“Few people speak out. When they do, they are publicly slammed as too fearful of being disrupted to open their eyes to the future – and not visionary enough to see the great potential that crypto-powered networks will deliver.”

Bitcoin, Webster argued – as well as the other 1000 cryptocurrencies that have popped up in its wake – doesn’t live up to the hype it come pre-packaged with. Cryptocurrencies are not free, they’re not fast, they’re not all that secure, they’re an anathema to regulatory prerogatives all over the world that call for transparency in transactions … and their current use cases are, well, shady.

“Bitcoin has only two proven use cases after eight years: criminal activity and speculation. I honestly don’t understand why this continues to be dismissed in the face of mountains of evidence to the contrary. In the eight years since bitcoin has been a currency, transaction volume in the support of legitimate commerce is virtually nil.”

And that trajectory of enabling speculation, Webster noted, has now pushed a wave of ICOs, with customers buying into coin offers without a promise of equity or really much of anything – except a token that may or may not have any value in the future.

But while skeptics have emerged, bitcoin and cryptocurrency have a lot of fans, and we suspected we might hear from some of them.

“I have no doubt that I’ll be told by thousands how wrong I am,” Webster noted as she signed off on her case against bitcoin, somewhat baiting the trap as she did.

How right she was. Lots of people noted how wrong we were.

But there were also those who thought we were right, telling us how “liberating” it was to hear someone say it. And there were others who thought we had a few valid points, even if we weren’t giving bitcoin the love it deserves.

We won’t share all of the comments. But for the inaugural PYMNTS Talks Back, we thought we’d pick some of our favorite highlights from the public postings on the piece … and a few lowlights as well.

The Winner of The Comment Section

With so many comments to go through, it was hard to pick a winner.

We considered as a badge of pride the number of people who called us idiots, accused us of being financial service industry shills, looked forward to the days when they would look down upon us and laugh – and who questioned our parentage, our literacy, our understanding of blockchain technology and really any technology at all whatsoever.

We thought they made a number of important points.

We were so sad to hear us called haters, though – really?

But only one commenter provided us with a cliffhanger.

The head of decentralized identity at Microsoft not only thinks we’re wrong, but is in an apparent state of delight over how wrong we are – and promises to drop a stunner on us “and folks of our ilk,” as apparently, we are idiot Luddites.

Daniel Buchner, Head of Decentralized Identity at Microsoft

Karen, what can I say about a post riddled with this many inaccuracies and ridiculous assertions. I cannot wait – nay, I am in a state of delight – to drop a stunner on folks of your ilk.

Buckle up, you’re in for a ride.

Thanks, Dan! We’re buckled up.

Let us know when the ride starts.

As for the rest of the comments …

Yes, Someone Finally Said It (Those Who Agreed)


Interesting battle of the biases here and there: People with obvious interests in selling the gospel of cryptocurrency are calling an unbeliever names and worse, besides declaring their own convictions holy by default. Of course, one cannot stop developments, and of course the author does not really think she can. The zealots, however, should thank her for furthering thought on the subject. Unfortunately, some seem too blinded by their religion to do that. I for one am still on the lookout for crypto-buffs who are able to simply explain where cryptocurrencies touch on real value in the real world, rather than their present twofold use as either [a] vehicle for speculation, or handy means to obtain illicit goods. And that is something else than blockchain tech in general, which is great and here to stay for a myriad of other purposes than cryptocurrencies.

Technology Consultant

Spot on, Karen. Kryptonite will become as toxic [as] it is infatuating – all in due time. It does have benefits, however. You mention criminals. That’s a biggie, alright. But the blockchain technology also holds promise for future banking transactions and encryption in general.

Yet fundamentally, a currency must be accepted on both the supply and demand side. This, of necessity, means federal control (Fed), perhaps even global (IMF), regulations and protocols for transactions. Which in turn means the crypto must usurp and ultimately become a substitute for currency in place (US$, Euro, RMB). This is simply not going to happen.

The emperor is not only naked, the emperor is covered with false hopes and dreams, delusions and quite adept [at] baiting and hooking the foolish, the river boat gamblers, and those who simply lack understanding of finance and banking…~r

Digital Payments Manager

Well-written article, possibly everyone who watches the cryptocurrencies wanted to mention some of the views expressed by Karen Webster but have chosen to remain silent ? I completely agree with the views shared here.

Well On Balance (The Mixed Feelings Crowd)

Attorney, Blockchain Enthusiast

Definitely a bit far-fetched, but I agree that it makes some valid points. One thing that stuck out to me is that VCs are the visionaries who see what others can’t. I counter with oftentimes, they are not the only ones with the visions, but simply the money. If everyone had the funds to invest in whatever they wanted or thought would succeed, we would live in a very different world. Secondly, there has been plenty of criminal activity and speculation from legal/regulated entities. Bitcoin did not bring this to the financial sector; “big banks” did.

It is easy to make generalizations. There are some great products being built on the blockchain technology, and I don’t think that should be disregarded and lumped in with the volatility of bitcoin and other currencies.

Software Development Engineer

Despite a few technical inaccuracies, there is a good amount of common sense and truth in this article, and I think it’s helpful for the blockchain development community to consider these arguments without cognitive dissonance. The concerns about bitcoin’s ability to scale are valid. I agree that gas costs to the network are not considered by those who claim that web3.0 will be “free”. The concerns over scam ICOs and dubious business use cases for decentralization are also valid, (although I’m not convinced the author fully understands what decentralization is). It’s true that many proposed blockchain applications could be effectively implemented using existing centralized infrastructure, and that many blockchain entrepreneurs are currently motivated by either (a) easy funding due to hype, or (b) wanting to decentralize everything for the sake of (i) fighting “the man”, or simply for (ii) the technical challenge. Not enough blockchain entrepreneurs question the value prop of decentralization. That being said, I think cryptocurrencies and the blockchain will be here to stay, because they provide an alternative to: (a) governments who can mismanage economies and create hyper-inflation (Zimbabwe, Egypt) – there are projects actively working on creating stablecoins on the blockchain ecosystem, with automated and decentralized mechanisms that mimic a (hopefully) responsible central bank; (b) governments that control currency and/or asset supply (Argentina, India’s demonetization); (c) centralized organizations that profit off information asymmetry; blockchains provide universal truth. There is also great potential for prediction markets to incentivize the public to be an arbiter of truth and profit in areas [that] are currently owned by central actors.

You Know Nothing, Jon Snow (The True Believers)

Technology Entrepreneur

This is a very biased and dismissive piece. Nobody can claim complete impartiality (I am biased here as well), but “The Crypto Has No Clothes” meaning what? It’s all bad, really, all of it??? We can argue about merits of bitcoin or Ether, or any other specific cryptocurrency, but this type of blanket statement by definition is not constructive, just like [the] now famous or infamous statements from Mr. Dimon. Yes, prices are irrational, yes, we need regulation, yes, the ICO phenomenon is one major disaster away from being completely shut down, but this doesn’t mean we should or could dismiss the cryptocurrency innovation. The first big use case for the internet was online porn (still is a big business); it doesn’t mean the internet is bad and we should [shoot] it down. I don’t think the biggest use case for bitcoin so far is illicit drug trade. I think it’s a store of capital, however volatile and imperfect it is. Vancouver real estate prices have been irrational for years because Chinese investors were eager to park their capital (almost at any cost) outside of the reach of their own government. Now Chinese or Russian investors have a better, more liquid and portable alternative. The Internet 1.0 liberated and democratized the information, all internet companies are built on that foundation, now cryptocurrencies are liberalizing and democratizing capital.

Information Security Consultant

If you believe you can “shut down cryptocurrencies” you have more reading and research to do.

Your claim that bitcoin has only two use cases after eight years (black market and speculation) is also inaccurate. Using public transparent ledgers in an attempt to conceal your transaction is frankly the stupidest way to use the technology, and the fact that virtually every black market built upon public/transparent blockchains like bitcoin have shut down proves this.

I commend you for trying to write a “thought leadership” piece on this new technology, but your lack of understanding has led you to some very incorrect conclusions about the technology. If you must make analogies between bitcoin and other concepts that are difficult to understand, compare bitcoin and the internet. In the first few years, learning that computers can talk to other computers over a wire was not interesting.

Computer zealots talked about a future where everything would be computerized, but none of our friends/neighbours had computers, so none of us cared. Fast forward, and it’s obvious how much the internet changed our society once all of us jumped into this walled garden.

Bitcoin and its underlying blockchain technology has incredible properties that our society doesn’t yet understand, let alone use – just like the internet did – and it has far more use cases than “a black market” (which is literally the worst way to use public/transparent tech) and “speculation.” While many people speculated on the internet in the 2000s, many other people built fantastic technology that made applications easier to use for the regular man/woman/child, and allowed the power of a global interconnected network to be used by every one of us.

Blockchain technology will change the world more drastically than the internet did, and more quickly. To say that it needs to “be shut down” is akin to calling for the internet to be shut down because this one time, some guy sent child porn to another guy. Sure, tools can be used for bad things, but they can be used for good too, and trying to ban a tool for the actions of some guy is incredibly short-sighted.

Keep reading about bitcoin and cryptocurrencies.

You may call me a zealot, but if you’re going to purport yourself to be an authority on a subject you clearly do not yet understand, you should probably become a zealot yourself first.

Cryptocurrency Entrepreneur

Bitcoin is the child pointing to the Emperor: “Your fiat has no value”. While many still laugh at the child, glancing at the other imperial advisors in their trapping of power, the word has shaken the confidence of many – and they flee to a publicly issued currency whose main innovation is that it cannot be counterfeit … the supply and the transactions are there for all to audit. (edited)

Technology Consultant

I’m not going to tell how wrong you are.

I’m going to tell you how:

  1. The “company” you’re keeping is also being sued for market manipulation of false and misleading comments on bitcoin, as well as being fined $13 billion as settlement for mortgage fraud:
  2. Billionaire Mark Cuban himself invests in ICOs and retracted his previous statement on cryptocurrency as a bubble after his own due diligence:
  3. Hedge fund billionaire Mike Novogratz is betting it on bitcoin.

If you’re so smart, then I suggest you short bitcoin in a long-term futures agreement or prediction market (surprise! Ethereum smart contracts can execute that cheaply without escrow – Augur is a use case). There are many traders that will take you up on that. No need to talk about who’s right – that’s futile. Let me know how that turns out.

Conspiracy Theorist

Banks are opposed to cryptocurrencies because if you store your money in a dollar pegged, or currency stable, blockchain wallet, you are not depositing your money in a bank. Commercial banks take risk with your money [as] leverage to make money buying investment bank products, and sometimes their own products. You are basically taking away fuel from their risk taking. They take risk with your money and share that risk with you, but they do not share with you the profit from that risk taking … the government is supposed to back that risk, but they keyword is “supposed to” … when there is a financial crisis, however, they share with you that risk: a fall in value of your house, etc. It means we are ending their rip-off show. Of course, they [are] going to go kicking and screaming.

There is literally zero value added to a customer with a commercial bank. Their savings rates [are] a joke, and quite honestly almost insulting. That aside, they offered no other value. And when things don’t offer value, somebody comes along and rips the rug out from under them. Hundreds of thousands of people are going to lose their jobs and I’m happy about that.

Sick Burn Dude (The Kool Aid Drinkers)

Daniel Buchner, Head of Decentralized Identity at Microsoft

Karen, what can I say about a post riddled with this many inaccuracies and ridiculous assertions. I cannot wait – nay, I am in a state of delight – to drop a stunner on folks of your ilk.

Buckle up, you’re in for a ride.

Cryptocurrency Entrepreneur

The author is an idiot

Financial Services Professional

Banning bitcoin will surely work. Look at what it did for drugs, alcohol, gold ownership, guns and abortion. As bitcoin looks to crest mid 5 figures next year, we must come to the realization that the government has no power to stop it. It is time to embrace the evolution of money rather than fight against it. I think banning the government’s ability to ban is a great start.

Cryptocurrency Entrepreneur

This is the funniest damn thing I’ve read in a very long time. [It] just oozes fear. If you aren’t pissing somebody off, you aren’t innovating. Thanks for the validation, Karen, and enjoy chillin with the bankers.

Tech Entrepreneur

I tried my best to make it through this garbage, but simply couldn’t. You know nothing about the impact that cryptocurrencies and blockchain tech will have on every industry in the world. Keep grasping on to your horse and buggy…

Cryptocurrency Entrepreneur

In (sic) sorry but this writeup is pure garbage. You can tell the author has no understanding of the technology. Ask anyone in the tech industry, crypto is here to stay.

Chartist Day Trader

You are such a hater Karen. Blockchain is the real value and it’s being fueled by the expression through bitcoin. Way to not see the big picture and use the “bitcoin is for drugs/terrorism” argument that is so hackneyed.

Crypto Enthusiasts

I’m going to make the following points so you can’t claim male oppression:

  1. You claim to be an innovation consultant, but don’t understand the technical underpin[nings] or business implications of [the] biggest technological development in the past 10 years. The point of cryptocurrency is that it cannot be shut down.
  2. All your negative use cases have happened in fiat and wire/swift payments. Humans are bought and sold on Western Union wire transfers. Michael Perklin also makes the point that the transparency of blockchain makes it the WORST way to do bad things.
  3. A cryptocurrency might not be legal tender, but as long as someone accepts it as a store of value and provides current value in good[s] and services, it is no different from any other store of value, i.e. gold.
  4. You bemoan the “slow” processing time of bitcoin, but ignore/are uninformed about Lightning protocol and off-chain transactions, as well as Polka Dot that can solve it. You then cite Mpesa, which has 8% transaction fees … and give slow swift a free pass.
  5. Your clients need to see this and wonder about the quality of the advice you have given.
  6. Please read up more on cryptocurrencies. I look forward to your amended/retracted article.

Bottom line: We should keep debating. We love opening up conversations and are glad we did.

All we ask is that you bring your frameworks and context to the discussion, please.

Because, as the commenter pointed out, we are not the sharpest blocks in the chain. And such an approach usually works well when one is talking to idiots.

We will be happy to hear your thoughts

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