Naftemboriki.gr is the favorite business news magazine for the Greek shipowners, businessmen and traders as its name recalls (naftemboriki – Relevant with marine trading). It appears that recently Naftemboriki dived into the crypto world after publishing an article written by high-ranking ECB officials Ulrich Bindseil, Director General of Market and Payment Infrastructure at the European Central Bank (ECB) and Jürgen Schaaf, advisor to the same sector criticizing and "deconstructing" one by one the arguments in favor of a cryptocurrency and especially bitcoin by concluding with the statement that "A viable bitcoin is as impossible as zero division".
The article's title translated in English from Greek is "Unfulfilled Promises. Why Bitcoin can't be viable" and the greatest surprise about this article criticizing bitcoin from the ECB officials is that I tried hard to find the original English or even German version of their articles and it is possibly very unlikely that they have published their original article in Greek as both of the authors are Germans and the only information that I could find about them was their Linkedin and Twitter accounts that brings a lot of suspicion about the true authorship of the article although in their tweets both appear to be anti-bitcoin activists and naftermboriki.gr can be considered a highly trusted source of business information in Greece. The only document that I could find about Ulrich Bindseil is an ECB published document with title: "The Eurosystem collateral framework explained".
My first job then is to provide a google translation of the article in English and I am not ashamed to mention that because I want to present the authentic article without any personal modifications in order to be as accurate as possible. I didn’t want to interfere in its presentation but make it also available to English-speaking audience. Unfortunately, I am not able to transfer the whole article translated on Publish0x due to strict publishing rules of the platform requiring written permission from the authors. However, you can find the translated in English version of the article of Ulrich Bindseil and Jürgen Schaaf on noise.cash with title "My comments on the Article A viable bitcoin is as impossible as dividing by zero"
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NOT AVAILABLE ON PUBLISH0X DUE TO COPYRIGHT RESTRICTIONS
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It is certain that someone can find numerous articles against bitcoin especially in Medium such as the articles "Bitcoin and Ethereum Are Dead (And Their Honest Investors Know It)" and "Bitcoin is a Giant Ponzi Scheme". BitcoinGordon has made in the previous months an extensive report with his own flooding-style writing on the article "A Rational Rebuttal To An Article That States "Bitcoin and Ethereum Are Dead" on Publish0x.
Vassilis Pantazopoulos is another “popular” Greek crypto-activist, pseudo-crypto-evangelist and publisher who is also trying to earn some fiat money by publishing books about bitcoin in Greek taking advantage from the recent cryptocurrency hype and curiosity of ordinary people who are following unblindlly and without question anything about the cryptospace. Recently he has published an article on euro2day.gr/ with title "The Unfulfilled Promises of Bitcoin" and a video blog on youtube also in Greek responding to the above mentioned article written by the German ECB officials and authors against bitcoin with his "own" counter-arguments. However, the interesting thing about Pantazopoulos article (and the rest of his articles) is actually the fact that it is actually a Greek translation of the very same article published from another blogger in medium called geozee who published his original responses in the article The Unfulfilled Promises Of Bitcoin, without mentioning its original source of translation!
Since the plagiarised and translated article of Pantazopoulos that i have initially found was also in Greek, I took the initiative to translate it again, but this time blending and reinforcing geozee's and NOT Pantazopoulos counter-arguments with my opinion as well. Again due to copyright restrictions from Publish0x I won't be able to publish geozee's comments but only mine. However you can find the complete version that includes geozee's comments on noise.cash on the article with title "My comments on the Article A viable bitcoin is as impossible as dividing by zero". Here, I will only post the arguments of the ECB officials from their article and my comments below them. You can also find the original answers of geozee on the article The Unfulfilled Promises Of Bitcoin in Medium. Surprisingly, geozee decided to remove his article from Medium so it is no longer available. Even more shocking was the answer that he gave me when i sent him a message describing the whole situation and also requesting him if it is ok to use his comments as a reference:
Nevertheless and without digging the situation even deeper, I have decided to continue expressing my own opinion about the main counter-arguments of the initial ECB officials article:
"There is now widespread consensus that Bitcoin has not achieved its original goal of being a currency."
For sure wealthy famous CEOs of Crypto Exchange Trading Platforms, Entrepreneurs and Hedge Funds owners have already made a fortune on fiat money from the bullish rally of bitcoin. Microstrategy’s Michael Seylor, Tesla’s Elon Musk, CoinBase’s Brian Armstrong, Binance’s CZ, Gemini’s Tyler and Cameron Winklevoss Brothers are only few of these names. However, my question is the following:
Are you into crypto only because you want to buy an expensive property or a luxury holidays in the Caribbean or even pay your fiat bills to the established centralised regime after exchanging your hardly earned and precious bitcoin with fiat money? Is the only reason for being on the crypto world to take some profit from the bitcoin value and buy something in fiat money boasting to your friends for your achievement and your investment profit? Are you in the cryptocurrency world because in fact you want to become a fiat millionaire? Is this the real vision of Satoshi Nakamoto for the establishment of a decentralised monetary system? Is your main reason for being in crypto world, only to take some profit from your cryptocurrency investment and then return on the same centralised fiat system that you have been trapped for decades but this time richer by few thousands of US Dollars printed by extra millions every year?
Or do you want to be part of a decentralised monetary revolution and stay in a decentralised monetary system of a cryptocurrency with a FIXED 21 million circulation supply without any further printing and without losing the value of your money due to the inflation caused from the printing of new paper money from the centralised monetary system of the establishment?
"Lack of acceptance by traders due to long settlement times and high fees already show that Bitcoin can not be taken seriously as a means of payment except for a few small and scattered pockets. The latest major failure was El Salvador's attempt to introduce Bitcoin as the second legal currency next to the US dollar on September 7th. The attempt failed at the moment, mainly because there was no acceptance from the population, and sent the Bitcoin exchange rate down (loss of 15% overnight)."
I am not aware of that “official data” about the percentage of adoption of Chivo’s, El Salvador’s digital wallet that geozee mentions either he reports its source of information but what is already known according to Reuters article with title "Analysis: Remittance firms slow to add bitcoin, despite El Salvador move" is that Bukele’s main argument for the establishment of bitcoin as a legal tender in El Salvador is that bitcoin can fight the current problem of heavy remittance fees paid from El Salvadorians who are sending their fiat money to their relatives through 3rd party fiat money transfer providers such as MoneyGram and WesternUnion. I have published a relevant article on Leofinance with title "The Salvadorian Revolution of Bitcoin". Even better he is trying to attract in his country bitcoin professional miners who could make use of country’s volcanic geothermal natural energy to support their mining activities making bitcoin greener and fighting against the main argument against bitcoin as non-ecological as it demands huge amounts of energy for its mining activities.
"Bitcoin's technically stable "money supply" is also proving to be a weakness, if we look more closely: what is being launched as a protection against inflation would inevitably lead to the inflation trap in a growing economy."
According to geozee, Bitcoin is not deflationary. Its total quantity does not decrease, it increases up to a maximum threshold. It just grows at a predetermined and steady rate that goes down every four years. For example, 900 Bitcoin per day are generated during this period. In the next period 450 will be created, in the following 225 etc. Unlike government currencies where no one knows how many and at what rate they will be "printed" every year, eroding the element of rarity and being highly inflationary, Bitcoin has a maximum allowed amount. It is the 21 million coins.
And that was a major designing financial breakthrough for Satoshi Nakamoto on the paper A peer to peer electronic cash system.
On the contrary to Bitcoin, Ethereum has no upper minting limit or circulation supply according to its whitepaper. Vitalik Buterin tried to mitigate the situation of this faulty Ethereum design by enabling the burn of Ethereum in every transaction instead of providing a reward to the ETH miners with the latest London update hoping to reduce the cost of gas fees as well but without success leading the upgrade to a huge fiasco. Other tokens are following similar policy with Binance’s BNB of the Binance Smart Chain network burning millions of BNB tokens every quarter in an attempt to keep its circulating volume low.
"Consolation, however, is the fact that the supposed protection against inflation through a steady supply of cryptocurrencies is false as the number of potential cryptocurrencies that can compete with Bitcoin is, after all, unlimited."
Geozee's argument is that if all the ore quantities of the world are accumulated together to prove that gold is not rare, because it is an ore! As if adding all the currencies of the whole world governments, to convince that the euros in circulation are too many. Geozee is right in his perspective but I have to admit I have similar thoughts with the ECB officials after Gary Gensler's statement that the Cryptocurrency world resembles today the "Wild West" era.
I have to say I was troubled a lot from Gensler's statement and I have to admit that geozee perspective is a very good argument that is valid only individually for bitcoin or for every other cryptocurrency. The difference of the cryptocurrency existing unlimited “variety” against the circulating fiat money "variety" printed by all the world’s central banks is that there is no limit in the amount of how many different cryptocurrency can exist. According to wikipedia's List of Circulating (Fiat) Currencies, currently there are 180 currencies recognized as legal tender on the United Nations including 50 pegged currencies. However according to CoinMarketCap, on October 3rd 2021, there are 6,938 different crypto coins and crypto tokens and every day more emerge without any control or regulation.
Today, anyone can create its own crypto token and be his "own bank" even by using the AWS platform with limited actual resources and with shady capabilities and potentials and most of them proven as scums of making easy money. Several examples are all the doge-meme style tokens with various doggy names, shiba, chiuaua, Babydoge, dogefather, doge-grand-father and the rest of doge-sh!tcoins. Today You can give any name derived of the I don’t know how many nouns and fictional names that exist in the English vocabulary, make a promotion on CMC airdrop and you get rich in fiat money. As a result, SEC’s head Gary Gensler mentioned that the current crypto world is a kind of Wildcat Banking of the 1837-1865 period in various isolated areas of the Wild West USA, with thousands micro private banks minting their own currency and asking from people to buy it as the next big thing in their micro-world.
"The commonly used comparison with gold is also misleading, as gold has been used in industry and had value as jewelry for centuries before anyone thought of using it as a means of storing value, an investment form or a foreign exchange stock. In addition, gold does not degenerate over time and retains its value even in chaotic conditions or in the temporary failure of digital infrastructure."
Again I should agree with geozee. Gold is a commodity that also functions as money, which is why it behaves like a currency. Bitcoin is exactly the same, only it is digital, intangible. The solutions that worked satisfactorily in the analog era are outdated. We do not use envelopes, papers, stamps for our communication anymore. Our work becomes much more efficient, economical, faster, with e-mails.
As to whether Bitcoin degenerates over time, the ECB officials should retake a high school level exam in computer science. The building block of Bitcoin is the bits, not the atoms. The digital world is very different from the physical, the tangible. An electron has no color, no weight and it can travel at the speed of light.
Even if internet is temporarily suspended, the bitcoins kept on cold wallets or on crypto-exchange servers aren’t lost as bytes are stored in a magnetic form. Have you ever lost your data when you turn off your laptop or not? Why should you lose your Bitcoin then? However, if the Internet stops working tomorrow, will the banking system be able to continue working? The stock exchanges? Trade? The economy? In this scenario, the least of our problems will be Bitcoin. We all have seen what happened lately with the big Facebook shutdown.
"Finally, the argument that the fiat money of modern central banks has no intrinsic value is unfounded as with the deliberate departure from gold hedging, states and central banks have issued strict mandates, legal guarantees and institutional and operating arrangements (independence, as well as loans against collateral), so that they can let go of the gold brake without losing stability."
I totally agree with geozee as it is certain that the citizens of almost all developing countries that have a weak currency will disagree with the above statement. The Turkish lira, the Argentine peso and many other currencies have lost 99% of their value in the last 5 years against Bitcoin. There is even countries that they don't have a national currency but they depend solely on US dollar such as Zimbabwe or Panama or El Salvador. Even in the Western World, in the USA or in EU, how confident can they feel where the "printing" of money, especially lately, is completely out of control ?
"In addition, Bitcoin produces neither cash flows nor dividends, and its maintenance is extremely expensive."
Bitcoin can be considered as digital gold by no accident. It is designed so that It can retain its value for long period of time due to its limited supply quantity to 21 millions. Keep it in a cold wallet for 40 years and it will still be there. Or you can deposit it into a bitcoin’s Savings account in one of the available crypto-exchange platforms such as Binance and you can get an annual interest on top of it.
"Common sense is enough to realize that the price of Bitcoin will sooner or later be zeroed."
Nevertheless, the above statement is being circulated on the press for the past 12 years. In 2013 I had my doubts too about Bitcoin's value. Not in 2021. I believe that the above statement is highly manipulated without any specific argument to support it. Anyone can say everything without proofs. I can declare that “Bitcoin will reach 100K USDT by 2023” without any arguments to support my statement. Does it make anyone to buy more bitcoin in order to become a fiat millionaire ?
"While Bitcoin accounted for almost 90% of all cryptocurrencies at the end of 2016, today it accounts for only about 40%."
Again I totally agree with geozee's reply. Only Layer-2 solutions can make bitcoin a global payment system and possibly other kind of cryptocurrencies are more suitable for this role. Ask Elon Musk, he should recommend DogeCoin.
"Despite its financial weaknesses, there is still a vision of liberation from state control and abuse of power by central authorities. Bitcoin, with its decentralized organization, promises the emancipation of the individual and the absolute democratization of the monetary system. However, Bitcoin's pseudo-liberal ambitions tend to come from privileged elites who are comfortable with the security of the rule of law, without understanding how the market works and the regulatory effect of the rule of law and institutions. Freedom needs rules, otherwise there is the threat of anarchy and the law of the strongest."
I should totally agree with geozee's reply which I believe it fully reflects Satoshi Nakamoto’s Vision for an independent democratic monetary system that isn’t manipulated from “corrupted” politicians, bankers and bad actors (as long as they stay 51% less of the consensus mechanism). Having the bitcoin consensus regulated from the people and the centralised system that it was designed to avoid, would only make bitcoin part of the same centralised system that it was designed to revolt from. Then Satoshi Nakamoto would have failed and his Vision would have been faded out simply because governments and their established systems are stronger in manipulating people on that direction. Then there would be no hope for an alternative monetary system and bitcoin’s value will be nullified. If freedom needs rules, these rules have been defined on the paper "A peer to peer electronic cash system". Bitcoin doesn’t need any goverment-oriented “freedom” rulebook of a corrupted & failed system.
"Bitcoin is also by no means as "democratic" as its community once thought, at least in the early days, but it is shaped by financial interests and strong shareholders. The mass, 75% of the addresses, holds only 0.2% of the market share. The 100 largest Bitcoin shareholders hold more value than the smaller 38 million combined."
From my point of view this is actually a pro-bitcoin argument instead of being an argument against bitcoin and it seems that the ECB authors are contradicting their previous mentioned argument that "There is now widespread consensus that Bitcoin has not achieved its original goal of being a currency."
I can accept that the 100 largest Bitcoin shareholders hold more value than the smaller 38 million combined confirming the power-law nature of the bitcoin distribution curve (as it is described in A.-L. Barabási & R. Albert “Emergence of Scaling in Random Networks” and at Laszlo Barabasi's book with title “Linked: How Everything Is Connected to Everything Else and What It Means for Business, Science, and Everyday Life“ Perseus Publishing March 2003) although the authors provide no specific point of reference of their argument. Personally, I don’t find it a bad thing. Yet, the authors have made a huge mistake in what the democratic nature of bitcoin is. Bitcoin’s democracy lies on its decentralised nature and not because of the power law distribution of its holders. It means that the bitcoin consensus isn’t a right of the state-owned central bank like it happens with national fiat currency where the decisions upon the consensus is taken from the governor of every state-owned central bank or from the parliamentary majority of the government that controls him. The Bitcoin consensus comes from all the bitcoin nodes across the world as long as they avoid a 51% attack thus an attack of the 51% majority of the nodes who execute the confirmation of the transactions. So apparently the authors haven’t studied enough Satoshi Nakamoto’s paper "A Peer to Peer electronic cash system" or they performed a wrong translation into their native language to understand what the Bitcoin consensus and what a 51% attack are. Finally in contrast with many cryptocurrency projects, there is no governance voting mechanism of bitcoin blockchain proportional to its hodlers funds so apparently there is a confusion here from the authors what democracy means in the bitcoin blockchain. Possibly other cryptocurrencies follow a relevant governance voting mechanism and it is very likely that a cluster of whales can easily manipulates the decisions in the direction of their interest and I have made a similar remark on my article "A critical eye on FORTH Token Big Sellout" about the emergence of FORTH tokens whales who can govern the AMPLEFORTH ecosystem through its governance mechanism.
"In addition to the design flaws that undermine the long-term interest in Bitcoin, the cryptocurrency also poses risks to society and the environment: the system is widely used for criminal activities and wasteful energy on a large scale."
Without having any proof, it is possible that in the early years of bitcoin existence, the blockchain has been used by criminal organisations in order to “hide” their illegal funds. However, since today all bitcoin transactions are visible on blockchair nobody can escape and certainly nobody can liquify any crypto assets into fiat money without providing any KYC verification. So It has become amazingly difficult for criminals to liquify their digital assets into their preferred form of fiat money as cash without being identified.
Moreover, renewable energy is being extensively used today for the power supply of the bitcoin mining farms and the latest example is the installation of a bitcoin mining container in a volcanic geothermal energy factory in El Salvador by the state’s President Nayib Bukele.
"everyone is already well-informed enough not to rely on Bitcoin as a means of payment or as a capital investment. A viable Bitcoin is as impossible as dividing by zero."
As a final conclusion, I would possibly agree with geozee that the publication of this critical article about bitcoin from high ranking ECB officials it is a little bit weird and suspicious. While their boss Christine Lagarde has been open in investigation about an ECB Euro-pegged Digital Currency according with an article on Bloomberg with title "Lagarde says the ECB Governing Council will make a decision on a digital currency by mid-2021.", how is it possible her high-ranking ECB colleagues are becoming so critical over bitcoin and blockchain technology? When today there are so many blockchain-oriented organizations from well-known and established entrepreneurs as mentioned above, certainly nobody can claim that A viable Bitcoin is as impossible as dividing by zero."
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