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Why bitcoin is not a ‘fraud’ or ‘bubble’, but something you should take seriously

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Unless you have been asleep for the last year, you cannot have failed to catch the buzz around bitcoin and other cryptocurrencies such as Ethereum’s Ether and Ripple’s XRP. There are even some coins that were created as a joke that are getting significant investments, such as Dogecoin. Dogecoin was created as a way to educate people about how cryptocurrencies work, but the creator never expected it to be used as a currency. Jackson Palmer, the founder of Dogecoin, says himself: “When I jokingly tweeted about ‘investing in Dogecoin’ in late 2013, I never imagined that the tongue-in-cheek cryptocurrency I had just brought into the world would still be around in the year 2018, let alone hit a $2 billion market cap like it just did” in early January 2018. Apparently Asian investors like Dogecoin because they misread it as Dog ecoin, and investing in a dog-friendly cryptocurrency is very popular in some countries.

It is a little like the craze for cryptokitties that almost broke the Ethereum blockchain late last year. CryptoKitties is a game where users breed and trade digital kittens using Ethereum-based smart contracts, and it became wildly popular, so much so that some cats were being traded for $80,000, and the total value of the game reached $12 million in December 2017. Just for a game using cryptocurrencies to create digital cats.

What I am describing here is the mad world of cryptocurrencies that few understand, many are investing in and no one knows what will happen. Everyone predicts that this is a bubble and the whole market will come crashing down, and yet for each stumble the market takes, it just comes bouncing back. In fact, there is an excellent website called that started charting the predictions that bitcoin would disappear back in 2014. So far, they have tracked 236 forecasts of bitcoin’s death, and yet it still keeps growing. I find this interesting as I have personally been tracking bitcoin since 2011, and have just heard over and over again from my financially experienced colleagues that it is a scam, will fail, is silly, undermines the system and will never work. Yet it does work. It enables people to trade online for low cost with no financial intermediaries involved. This is the real concern: that bitcoin and other cryptocurrencies could eradicate the need for financial institutions.

This is why banks keep rallying against cryptocurrencies whilst embracing the technologies that allow them to operate, namely the blockchain or, more correctly, distributed ledger technology (DLT). Most financial institutions are piloting Ripple, R3, Ethereum and more, because they can see the cost savings of recording transactions on ledgers where no human involvement is needed. That can save the global markets billions, and is an active area of development.

It brings me to the core point here, which is that we have a technology which could change the world and yet we dismiss the community that created it. DLT is described by The Wall Street Journal as “a foundational technology, like electricity and the internet, whose transformational impact takes much longer”, and I very much agree with this assessment. For those who have immersed themselves in DLT, we know that it can completely transform everything from creating digital identity schemes that will replace passports to operating digital land registries that will replace the paper-based land deeds register to allowing clearing and settlement to take place in a far more efficient structure. This last point is illustrated well by the Australian Stock Exchange who, in December 2017, became the first major bourse to publicly adopt DLT to manage the clearing and settlement of equity transactions. Equally Dubai, which sees itself as the city of the future with flying taxis, robot cops and autonomous vehicles, made a firm commitment in 2016 to be the first city running on DLT by 2020. The state is well under way on that path, having signed up IBM to deliver this capability. The objective is to have all visa applications, bill payments and license renewals, which account for over 100 million documents a year, to be transacted digitally using blockchain within the next two years. That is impressive.

This is where it gets most interesting, in that you have two extremes here. On the one hand, the jokey world of the libertarians, who are playing with digital currencies and having fun; on the other, the serious world of business and government, who are committed to transform ledgers that need a lot of work to ones that can just run using DLT, based upon cryptocurrency blockchains.

The thing is you cannot have one without the other. You cannot make Ethereum work without ether, and you cannot use a bitcoin blockchain without a bitcoin. Therefore, the fatuous claims that bitcoin is a fraud and that cryptocurrencies are a bubble that’s going to burst is fundamentally inaccurate, when we are talking about a foundational technology that will transform planet Earth over the next decade. This is why I am holding my investments in cryptocurrencies for now, as I think there is a lot more action in this space before the bubble will burst, if it ever will.


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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