In monetary matters, there have been few innovations over the centuries. There is one, however, that has upset 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 that of a currency that arouses the enthusiasm of 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 a person who agreed 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 geeks. Very quickly, the value increased: a few months later, the same bitcoins were worth 600 dollars. 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 will not compare bitcoin to gold, as many observers do. Gold has existed for millennia, while BTC dates from 2009. It’s too recent! The 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 that of stock market indices.
Its creator, Satoshi Nakamoto, has still not revealed his identity. For what reasons ?
The mysticism 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 around his identity has prompted people to investigate: Satoshi could be a collective of people, a woman… Some try to impersonate him. Craig Wright, in particular, did not convince: he is nicknamed in the middle “Faketoshi”! I think the real Satoshi will never reveal his identity because it goes against his philosophy: a decentralized organization, the absence of a single regulator.
What is the profile of its main competitor, Vitalik Buterin?
This young Russian published the concept of Ethereum at 19 years old. He is 27 today. We know who he is, he doesn’t try to hide. And when he tweets for this or that change in the Ethereum ecosystem, people follow him. Without having any official power, Vitalik Buterin is a very influential person. Some see him as a sort of enlightened influencer, a brilliant mind to be listened to: he embodies for them the figure of the BDFL (“benevolent dictator for life”), which can be translated as “enlightened despot for life”! Like Satoshi, he also benefits from a very important aura.
What is the success of bitcoin?
Its monetary policy – in particular the fact that the stock is limited, as for gold – is interesting: it speaks well, and quickly, to people. And paradoxically it has been popularized and publicized thanks to its use in the darknet for illicit activities, such as drug trafficking. Another reason for its success: the much improved user experience.
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What place do other digital currencies occupy?
There are a lot of cryptocurrencies circulating on the net: more than 11,000 today. Bitcoin represents 47% of the market ($715 billion), while Ethereum takes second place with 18% ($273 billion). At first, bitcoin was in a quasi-monopoly situation. Its dominance is less strong today. This is a big change.
A player who preempts 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 the 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 earn money. In the cryptocurrency environment, you can bet down, up, use leverage. But beware: it is a complex trading that requires spending time. To start, I think it is better to start with a fund and work with a professional who will earn his commission! Another option, that of the “good father”: invest in recognized, solid cryptocurrencies, referenced by actors like 21Shares. The gains are smaller, but it’s safer.
What about the environmental impact?
Indeed, the creation of these currencies consumes a lot of electricity. But let’s step aside. No one is complaining 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 are emerging in this area. Ethereum, in particular, could 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, bitcoin was equated in its early days 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 don’t ban cars! Cryptocurrency is a tool, it allows the use attributed to it. To identify delinquents and criminals, there are very effective tracing methods. The police will have to train.
China has just launched its digital currency. What is this the sign of ?
China is very advanced on the subject. Since 2017, the Chinese have been filing patents to establish a traceable digital cash system. Objective: launch the 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 – disappears. Worse, the Chinese authorities could have a say in international transactions. In the future, we can also wonder whether, against the e-yuan, the dollar will remain the reference currency… Europe, on the other hand, is moving forward cautiously. The European Central Bank is studying the potential impact of an e-euro on the financial banking system, as well as its necessity.
Will our official currencies disappear?
Nope ! In my opinion, we are moving towards a coexistence of monetary systems. Each currency can have a role to fulfill, at each level of a community. It’s good that there is an efficient, stable currency, linked to a State or a group of States… It’s also good that there are local currencies, easier to manage on a human scale, which support economic dynamics closer to the people. You have to understand one thing: money is much more than a symbol. It has an influence on the behavior of the individuals who make up a group or a nation. How to create it, how to use it? This questioning is interesting to make it evolve towards something more desirable for society.
Cryptos in 3 words
- Bitcoin: with a capital letter, designates the network imagined by Satoshi Nakamoto. With a lowercase (or under the abbreviation BTC) denotes a unit of cryptocurrency.
- Mining: process which consists of securely recording transactions carried out in the 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, managed a consulting activity specializing in cryptocurrencies for four years. Today, she is the co-founder and chief commercial officer of ChainSecurity, a cybersecurity company in the blockchain industry. Speaker, she is the author of the book The Future of Species (Dunod).