In money matters, there have been few innovations over the centuries. However, there is one that has disrupted the current system: the Bitcoin network, developed by a mysterious creator whose identity no one knows. In ten years, Bitcoin has gone from an ultra-confidential status to being a currency that excites the general public. Author of the book The Future of Species (Dunod), Emilie Raffo takes stock of these new types of currencies.
The Bitcoin network is about ten years old. The stage of maturity?
Emilie Raffo: The first documented purchase took place in May 2010: an internet user took two weeks to find someone who was willing to deliver two pizzas to him for 10,000 bitcoins! At the time, it was relatively easy to undermine this currency: confidential, it was mainly considered a gadget for nerds. Very quickly the value increased: a few months later, the same bitcoins were worth $ 600. But in my opinion, the system has really matured with the arrival of institutional investors.
Before, this concerned a few computer-savvy speculators; today, reputable pension funds allocate part of their portfolio in BTC. With this type of investor, there is less risk of seeing the value fall. On the other hand, I would not compare bitcoin to gold, as many observers do. Gold has been around for millennia, while BTC dates back to 2009. It’s too new! Covid also represents the first crisis that made it possible to observe how this currency behaved. And to note that its value was correlated with the value of stock market indices.
Its creator, Satoshi Nakamoto, has still not revealed his identity. For what reasons ?
The mystery that exists around Satoshi Nakamoto has undeniably contributed to the success of the currency. Some even consider him a kind of prophet! The religious symbolism is strong in this universe: we say “believe in Bitcoin”, “have faith” in the system … The mystery surrounding his identity has led people to investigate: Satoshi could be a collective of people, a woman … Some try to imitate him. Craig Wright in particular did not convince: he has the nickname in the middle “Faketoshi”! I believe the real Satoshi will never reveal his identity because it is against his philosophy: a decentralized organization, the absence of a single regulator.
What is the profile of its biggest competitor, Vitalik Buterin?
This young Russian released the concept Ethereum as a 19-year-old. He is 27 today. We know who he is, he’s not trying to hide. And when he tweets about this or that change in the Ethereum ecosystem, people follow him. Without any official power, Vitalik Buterin is a very influential person. Some see him as a kind of enlightened influencer, a radiant mind to be listened to: he embodies for them the figure of the BDFL (“charitable dictator for life”), which can be translated as “enlightened despot for life”! Like Satoshi, he also enjoys a very important aura.
What is the success of bitcoin?
Its monetary policy – especially the fact that the stock is limited, as for gold – is interesting: it speaks well and quickly to people. And paradoxically, it has become popular and publicized thanks to its use in the dark web for illegal activities, such as drug trafficking. Another reason for its success: the much-improved user experience.
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What place does other digital currencies occupy?
Many cryptocurrencies are circulating online: more than 11,000 today. Bitcoin represents 47% of the market ($ 715 billion), while Ethereum ranks second with 18% ($ 273 billion). First, bitcoin was in a quasi-monopoly situation. Its dominance is less strong today. This is a big change.
A player anticipating a market is often overtaken by competitors who offer a better user experience. We can already see this with Ethereum. This blockchain has launched many very interesting innovations, such as smart contracts, computer software that allows automatic execution of contractual clauses.
Do you recommend investing in cryptocurrency?
If you like risk, go for it! The high volatility makes it possible to make money. In the cryptocurrency environment, you can bet down, up, use leverage. But beware: it is a complex trade that requires time to spend. To start with, I think it’s better to start with a fund and work with a professional who will earn his commission! Another option, the “good dad”: Invest in reputable, solid cryptocurrencies, referenced by players like 21Shares. The gains are smaller, but it is safer.
What about the environmental impact?
In fact, the creation of these currencies uses a lot of electricity. But let’s step aside. No complaints about Netflix’s green bill: We recognize that the platform offers services and value. So the question to ask is the following: is the value generated by cryptocurrencies sufficient to justify its electricity consumption? Is it worth it? And then innovations emerge in this area. Ethereum in particular may well revolutionize the sector, as it plans to consume less energy thanks to a different security consensus.
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Do cryptocurrencies necessarily rhyme with dirty money?
As I said, in its early days, bitcoin was equated with drug trafficking on the Internet. Today, it is associated with ransomware, a hack that allows blackmail under BTC. Cars allow thieves to get away faster, but we do not ban cars! Cryptocurrency is a tool that allows the usage attributed to it. To identify criminals and criminals, there are very effective tracking methods. The police must train.
China has just launched its digital currency. What is this sign of ?
China is very advanced in this area. Since 2017, the Chinese have filed patents to establish a traceable digital cash system. Goal: launch e-yuan for the 2022 Winter Olympics. Some people fear this Chinese advance. With this type of digital currency, the key principle of cryptocurrencies – decentralization – is disappearing. What’s worse, the Chinese authorities could influence international transactions. In the future, we may also wonder whether the dollar against the e-yuan will remain the reference currency … Europe, on the other hand, is moving cautiously. The European Central Bank is examining the potential impact of an e-euro on the financial banking system, as well as its necessity.
Are our official currencies disappearing?
Nix! In my opinion, we are moving towards a coexistence of monetary systems. Each currency can have a role to play at each level of a community. It is good that there is an efficient, stable currency, linked to a state or a group of states … It is also good that there are local currencies that are easier to manage on a human scale, that support economic dynamics more closely on the population. You have to understand one thing: money is much more than a symbol. It influences the behavior of the individuals that make up a group or a nation. How to make it, how to use it? This interrogation is interesting in order to make it develop towards something more desirable for society.
Cryptos in 3 words
- Bitcoin: in capital letters denotes the network that Satoshi Nakamoto imagines. In lower case (or below the abbreviation BTC) indicates a unit of cryptocurrency.
- Mining: process consisting of secure recording of transactions executed in blockchain. The “miner” receives a mining reward in exchange.
- Blockchain: shared database that maintains computer transaction history across multiple servers.
Emilie Raffo, a crypto specialist, led a consulting activity specializing in cryptocurrencies for four years. Today, she is the co-founder and commercial director of ChainSecurity, a cybersecurity company in the blockchain industry. Lecturer, she is the author of the book The Future of Species (Dunod).