Choose a decentralized currency that makes sense
Introduction
While I personally am a fan of central government management of monetary policy because it gives us great tools for managing crime and recessions, I'm not opposed to trying decentralization and seeing where it takes us. Decentralization helps fight the concentration of power and wealth, and it's a good old democratic tradition here in the United States.
Decentralized currency may be the future, but Bitcoin isn't it
I'm not convinced the world is likely to adopt any cryptocurrency whose value fluctuates wildly enough to make it attractive to investors. But if you insist on speculating on decentralized currencies, I suggest choosing one that makes economic sense. Barring a game-changing fork, Bitcoin is not the future of cryptocurrency. Its energy requirements are just too vast.
Every Bitcoin transaction uses as much electricity as an American household uses in a month (~730 KWh). That's about $96 per transaction if the processing were done here in the US. (Most Bitcoin transactions are actually processed in the developing world where costs are cheaper because air pollution is unregulated and miners can pump out all the carbon they want.) Bitcoin transactions are about 50,000x more energy intensive than Visa and Mastercard transactions. To process 350,000 transactions per day, the Bitcoin network is approaching the energy consumption of Norway. Visa processes 150 million transactions per day, so you can imagine the energy costs if Bitcoin scaled up to Visa's size. In no way is this a technology that makes economic sense.
Alts that make more sense
There are some alts that do a lot better than Bitcoin on the energy use front. Ripple (XRPUSD) is one of the more famous ones. Another is Nano (XRBUSD). These alts have much lower energy costs per transaction than Bitcoin does.
For instance, Nano transactions reportedly use only 0.000112 kWh of energy per transaction. Thus, the entire Nano network could be powered by a single wind turbine. That's much less than $0.01 per transaction in energy cost. (I've seen the cost estimated at about hundredth of a cent.) Nano is roughly 550,000 times more efficient than Bitcoin.
Ripple is another one that's incredibly energy efficient. Ripple reportedly uses 0.000011 KWh per transaction, making it even more efficient than Nano. Ripple, however, is slower than Nano by a factor of three. It's also not truly a decentralized currency like Nano is. It's owned and operated by a private company, Ripple Labs.
From a speculator's point of view, Nano is probably a better bet due to limited supply. The supply of Ripple is capped at 100 billion coins, but the current supply can triple before it hits that limit. Nano is already at its supply cap. Limited supply means the price of Nano coins could rip. Of course, from an adoption point of view, the limited supply of both these coins is problematic. It creates a scalability and price volatility problem that could prevent either coin from being adopted widely as a medium of exchange.
Don't get stuck in a Bitcoin rut
I believe we will see a lot more innovation in the digital and decentralized currency space. There are a lot of problems to be solved, and I don't think we've seen a single currency that solves them all yet. In addition to energy, speed, and price volatility, you've also got to think about privacy, security, and government compliance. How to secure cryptocurrencies against the rise of quantum encryption-breaking is just one of the huge problems that cryptocurrency innovators face. Given these challenges, I think it's a huge mistake to get stuck on a single cryptocurrency solution like Bitcoin. Bitcoin was first to the gate, but it's unlikely to be first to the finish line in my opinion. Investing in crypto requires deep research and deep thought about what the problems are and which technologies solve them best.
While I personally am a fan of central government management of monetary policy because it gives us great tools for managing crime and recessions, I'm not opposed to trying decentralization and seeing where it takes us. Decentralization helps fight the concentration of power and wealth, and it's a good old democratic tradition here in the United States.
Decentralized currency may be the future, but Bitcoin isn't it
I'm not convinced the world is likely to adopt any cryptocurrency whose value fluctuates wildly enough to make it attractive to investors. But if you insist on speculating on decentralized currencies, I suggest choosing one that makes economic sense. Barring a game-changing fork, Bitcoin is not the future of cryptocurrency. Its energy requirements are just too vast.
Every Bitcoin transaction uses as much electricity as an American household uses in a month (~730 KWh). That's about $96 per transaction if the processing were done here in the US. (Most Bitcoin transactions are actually processed in the developing world where costs are cheaper because air pollution is unregulated and miners can pump out all the carbon they want.) Bitcoin transactions are about 50,000x more energy intensive than Visa and Mastercard transactions. To process 350,000 transactions per day, the Bitcoin network is approaching the energy consumption of Norway. Visa processes 150 million transactions per day, so you can imagine the energy costs if Bitcoin scaled up to Visa's size. In no way is this a technology that makes economic sense.
Alts that make more sense
There are some alts that do a lot better than Bitcoin on the energy use front. Ripple (XRPUSD) is one of the more famous ones. Another is Nano (XRBUSD). These alts have much lower energy costs per transaction than Bitcoin does.
For instance, Nano transactions reportedly use only 0.000112 kWh of energy per transaction. Thus, the entire Nano network could be powered by a single wind turbine. That's much less than $0.01 per transaction in energy cost. (I've seen the cost estimated at about hundredth of a cent.) Nano is roughly 550,000 times more efficient than Bitcoin.
Ripple is another one that's incredibly energy efficient. Ripple reportedly uses 0.000011 KWh per transaction, making it even more efficient than Nano. Ripple, however, is slower than Nano by a factor of three. It's also not truly a decentralized currency like Nano is. It's owned and operated by a private company, Ripple Labs.
From a speculator's point of view, Nano is probably a better bet due to limited supply. The supply of Ripple is capped at 100 billion coins, but the current supply can triple before it hits that limit. Nano is already at its supply cap. Limited supply means the price of Nano coins could rip. Of course, from an adoption point of view, the limited supply of both these coins is problematic. It creates a scalability and price volatility problem that could prevent either coin from being adopted widely as a medium of exchange.
Don't get stuck in a Bitcoin rut
I believe we will see a lot more innovation in the digital and decentralized currency space. There are a lot of problems to be solved, and I don't think we've seen a single currency that solves them all yet. In addition to energy, speed, and price volatility, you've also got to think about privacy, security, and government compliance. How to secure cryptocurrencies against the rise of quantum encryption-breaking is just one of the huge problems that cryptocurrency innovators face. Given these challenges, I think it's a huge mistake to get stuck on a single cryptocurrency solution like Bitcoin. Bitcoin was first to the gate, but it's unlikely to be first to the finish line in my opinion. Investing in crypto requires deep research and deep thought about what the problems are and which technologies solve them best.
Comment:
Up over 100% since I made this call, and continuing to rise after Elon Musk's comments regarding the energy demands of Bitcoin.
