With the price of bitcoins has risen to more than $11,000 from less than $800 at the beginning of the year, with many people with no idea of what a bitcoin is joining a speculative spiral more similar to tulipmania than any minimally rational investment decision. In response, the US Internal Revenue Service has requested the largest provider of services related to cryptocurrencies, Coinbase, to provide the names of all customers who have moved more than $20,000 on the platform, a total of 14,355. The IRS began asking Coinbase for such data, including communications and messages, to which the company appealed, and a judge has ruled that the request was excessive.
What does the IRS expect to find in such data? Indications of possible undeclared earnings: there are more than six million Coinbase users, but less than a thousand Americans have included cryptocurrencies in their tax return.
The IRS’s efforts suggests a recognition that cryptocurrencies are part of the financial landscape, and it wants its share of the profits. To open a Coinbase account requires providing a national identity document, passport or similar.
The trope of the bitcoin and other cryptocurrencies as the symbol of the economy of the future, in a world in which millionaires are judged by how many bitcoins they own, has prompted a lot of greedy and ill-informed people to join what has all the makings of a bubble that will be the ruin of many.
Bitcoins make sense, but the way the virtual currency is being developed leaves much to be desired. Although some companies that offer bitcoin services provide debit cards with which to make transactions in bitcoins in stores and ATMs around the world, using bitcoin as currency is a non-starter, given that transactions require waiting for someone to register the transaction, a process that can take several days and large commissions.
It has to be said that the viability of a currency that uses the same amount of electricity per transaction as the average household does in a week or that has created a transactional ecosystem that uses more energy in a year than Ireland is open to question. Furthermore, if the value of bitcoins and other cryptocurrencies is based on a transactional algorithm that regulates its issuance… does it make sense that every time there is a new fork that gives rise to a new version or a new cryptocurrency? Is it logical, in a context regulated by scarcity, that we are creating Bitcoin Gold or Bitcoin Cash, as well as a whole plethora of different cryptocurrencies?
But beyond the high — and progressively higher, due to the nature of the algorithm — transaction costs, we should also ask whether in makes sense in order to use it as a way to store a value, the bitcoins owned by some people now have to be stored on paper in safes inside mountain shelters in the Swiss Alps, which makes them an alternative in no way superior to gold in operational terms? Does it really make sense in the 21st century to return to the methods and technologies of the middle ages?
Satoshi Nakamoto’s article that gave birth to bitcoin makes sense from an academic point of view, and is an elegant solution for a complex problem, but whether the way it is being used and developed makes sense is another question. Perhaps the time has come for a rethink of the basic principles? In short, does the bitcoin and other cryptocurrencies have a future, and if so, who for?
(En español, aquí)