I’m am starting to be more and more convinced that Bitcoin in bullshit.

It took me a long time to get here. I first bought a bitcoin in 2010 or 2011. At that time I was I was curious and just wanted to to see what it was about. A friend was setting up a site to sell stuff with bitcoin so I bought some bitcoin and used it to buy a couple of silver-dollar sized coins that had the ฿ symbol on them. I think I spent a little over $100 and I got 4 bitcoin. Whatever was left is long gone as the hash that would give me access to it was on a hard-drive that has probably been destroyed and in a landfill somewhere.

I went through a phase where I was trying to explain to people what bitcoin was. I understand how it works, but I find it difficult to explain it in simple terms. I’m not being elitist, it’s just that it really is kind of a weird concept. It’s a lot like explaining how a car works – you have to explain a whole bunch of other concepts, and in the end it’s not that interesting to most people anyway.

So I’ve been puttering along for years learning about bitcoin and then learning about economics in general. It turns out that all money is really a house of cards. Bitcoin is especially house-of-cardsy though.

Let’s take for granted that bitcoin is a real thing, has value, and ignore the complicated mechanism that makes it work. Let’s do the same for US dollars, and compare the two.

In an over-simplified metaphor, Bitcoin is backed by an algorithm, the US dollar is backed by guns. This makes US dollar more secure, but give a point to bitcoin for being less deadly. Or to be more fair, the dollar is backed by the US Government (which is backed by a strong military).

To create this algorithm, bitcoin needs lots of energy. Not to get too far into the weeds, but mining bitcoin requires proof that you crunched a bunch of numbers to run through iterations of a simple equation, that requires a bunch computing power, and computer power requires energy. So much that it’s creating environmental problems.

But comparing it to the US dollar is a complicated mess. Do you count just printing the money, or would you count the environmental impact of having a nation state? What about all the electronic transfers? To get real esoteric, how about the electrical signals between neurons that it collectively takes to believe in the currency? It could be considered a tie, or maybe its more like smoking cigarettes – it’s not the leading cause of cancer, but there is a clear, direct link to it that we can easily identify.

One thing that makes bitcoin bullshit is that it’s not really currency and never will be. You need to convert it to currency to spend it. And to do that, it’s really expensive. It’s actually just a store of value. It’s like gold or real estate, except that it has no intrinsic value like being used in electronics or providing a place to store your mother in law.

A big thing that makes it bullshit is what it touted as its main feature – it’s anonymity. This is often misunderstood to mean that it’s untraceable. It’s actually extremely traceable, even more so than actual currency. Each transaction is recorded in a ledger, so unless every single block in that chain has been anonymized, then none of them are anonymous. Giving someone cash is much more anonymous. Especially if it’s in small-denomination unmarked bills.

What anonymity in bitcoin really means is that transactions only require a string of letters and numbers and not a verified ID or anything like in a bank. So if you accidentally capitalize one of those letters in a string of 64 characters when sending bitcoin or receiving bitcoin, poof! It’s gone forever.

But the main thing that makes it bullshit is that it is essentially a pyramid scheme. The early adopters (myself NOT included) can stand to make a lot of money at the expense of those who hold out if it eventually implodes. There are plenty of legal pyramid schemes out there – we call them “multi level marketing” – but bitcoin is unregulated. This means that things that would be illegal in other markets – gold, stocks, utilities – is legal when trading bitcoin.

Combine all these factors, and I am ever increasingly convinced that bitcoin is bullshit.