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Bitcoin: a currency, gold or none of that?

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The most well-known cryptocurrency, bitcoin is often presented as a currency, a store of value or digital gold. Some food for thought around these ideas.

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Is bitcoin a currency? Does bitcoin make it easy to buy goods and services? This is possible in theory but very little the case in practice. Each transaction takes long minutes and is subject to a commission, which varies depending on the level of network usage. In recent weeks, these fees have varied between 13 and 25 dollars (12 to 23 francs). “With such commissions, no one wants to pay for their coffee in bitcoin, but it can be interesting to send money to another country, since international transfers charge an average of 6.5% fees. So for an international transfer of more than $ 300, bitcoin is cheaper, ”notes Yves Longchamp, head of research at SEBA, a bank specializing in digital assets.

Is bitcoin a store of value? Many bitcoin supporters predict that the value of bitcoin will not collapse like that of traditional currencies, rolled down by massive injections of liquidity into the financial system. Because it will be issued a maximum of 21 million units of bitcoin, probably by 2140. About 18.5 million have already been produced, and several million have been lost or are unrecoverable because their owner has misplaced the code of his electronic wallet, which accentuates the rarity of this cryptocurrency. Conversely, can a financial instrument which loses 85% of its value in less than a year – as in 2018 – really perform a store of value function?

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Is bitcoin gold? The two assets have many points in common, in addition to being in limited quantities and not being issued by a single entity. Like gold, bitcoin is expensive to produce, it can be split, it doesn’t earn interest, and it can’t be duplicated. Both are the subject of speculation and both “are used for transactions between strangers, in the absence of trust. Because the value of gold is universally recognized and because bitcoin is based on a system that generates trust on its own; it is “outside money”, a currency that exists by itself, outside any centralized system, ”observes Yves Longchamp, author of a recent study on bitcoin.

Side differences, bitcoin has no intrinsic value and its history of ten years is very poor compared to 5,000 years of use of the yellow metal. Bitcoin is easily transportable, can be accessed at any time, and can be sent relatively easily across the world.

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What use apart from the stock market? “It all depends on the end result. If bitcoin ends the year at 10,000, it will be said to be stock market trading; if it ends at $ 100,000, you will be congratulated on your investment. History will tell us; for the moment, most people are obsessed with the upside potential, ”notes our interlocutor.

Is bitcoin green?

Its production would mobilize so much energy that what a country like Finland or all data centers of the planet. This vision is systematically fought by the proponents of cryptocurrency. To get an idea, let’s compare with a traditional payment system, suggests the blog Digiconomist, which describes the unintended consequences of digital innovations.

According to this site, a bitcoin transaction would consume as much energy as approximately 800,000 transactions made by Visa. But this calculation does not take into account the energy consumed indirectly by Visa through the daily trips of its 20,000 employees going to work, for example. By adding this dimension, Visa’s carbon footprint is multiplied by 10, to 586,000 tonnes of carbon equivalent per year. Against 41.4 tonnes for bitcoin, according to Digiconomist, or 14,000 times less than Visa, in this logic. “At the transaction level, however, bitcoin has a higher carbon footprint than Visa. The bitcoin network can perform 5 transactions per second, compared to 4,400 for Visa. If we look at all these dimensions, is bitcoin worse, better or equivalent to Visa? ” Yves Longchamp still wonders.

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