Wednesday, March 14, 2018

Crypto Currencies are not doing what they are supposed to do

Crypto Currencies are not doing what they are supposed to do

In today's news Google just joined Facebook to band Crypto related advertisements. Along with other news about crack down or regulation of ICO and Crypto Exchanges, it is even more clear that what the cryptocurrencies originally set out to do is simply NOT doing its job, at least not in its current form or will stay in a niche segment.

The reasons why I think Crypto has a difficult job in doing what it's supposed to do is due to one simple factor: Open Source technologies. As long as crypto is based on open source technologies, it means that anyone can use it to create yet another crypto currency. That goes against the original objective of establishing a highly trust worthy and value protected limited supply currencies.

Crypto is supposed to give the power back to the people where every transaction is to be completely transparent and nobody can lie to anybody. However, the very act that so many company can create crypto will create quality variations which lead to trusts issue. When customers don't trust the products or platforms, regulation and supervision will be needed. Some we cannot just kick out the government or central power entity that manage the currency and exchanges.

The demand for every computer to keep and cross check on every transaction is simply over use of network bandwidth, CPU and electricity. So much storage across the millions of devices across the globe is used to store duplications of the ledger. Obviously it's a bit too much to maintain the check and balances. Image how much resources will be used if crypto currencies transaction is wildly accepted in future. I say this is simply not sustainable as a technology for mass transactions.

The check and balance quality as suggested by the Blockchain technology is good. The way it is adopted into bitcoin with an objective for mass market transaction is perhaps an overly optimistic attempt. If we are to deploy crypto currency for the mass, some kind of changes of the deployment is likely needed.

I have not invested in the past and will likely not to invest in Crypto currencies. I have to be frank that I was very much attracted to the potential of appreciation last year. However, the associated retracement risk and the technical issues I have discussed above stopped me from investing into crypto. Blockchain may be a technologies worthy for investment but I only see it as a way to improve efficiency in transaction execution. So it will the companies that uses the technology that can drive substantial profit. It would, by my wild speculation, be the incumbent financial institutions who already has millions of transactions to be benefited from the new technology. I believe it would be hard to find good sizeable investment from companies which "sell" the blockchain technologies.