Founding PayPal CEO Bill Harris is of the view that Bitcoin is little more than a pump-and-dump scheme on a large scale; it continues to survive entirely owing to its speculative nature, which has pulled “ill-informed buyers” into a “spiral of greed”.
Bitcoin has been around since 2009, but shot to prominence in mid to late 2017, when it registered gains of over 1600% and skyrocketed to a record-breaking price of $20,000. It has since receded in terms of price, but the fascination with the digital currency has yet to die down. While regulators are scrambling to try and rein in the volatile cryptocurrency and its peers, the crypto market refuses to die down, and Bitcoin’s price continues to fluctuate.
According to Harris, however, Bitcoin is nothing more than a scam. In a recently published post on Recode, the former Intuit CEO outlines three main reasons why Bitcoin has zero value and is a “colossal pump-and-dump scheme, the likes of which the world has never seen”.
Harris claims that Bitcoin has no value as:
A means of payment - he claims it is accepted nowhere, comes with high transaction fees and delays attached, and is unsuitable as payment owing to its wild price fluctuations.
A store of value - its price volatility, according to Harris, also makes it an unsuitable store of value.
A thing in itself - he states that it has no intrinsic value and is only valuable so long as people believe that others want to buy it. Harris questions: “In what rational universe could someone simply issue electronic scrip — or just announce that they intend to — and create, out of the blue, billions of dollars of value?”
In addition, he also refers to Bitcoin’s potential for usage in criminal activities such as tax evasion, and the fact that it has become a popular target for hacks. He also points out that Bitcoin mining consumes huge amounts of natural resources, and urges the SEC and other regulatory authorities to crackdown on cryptocurrencies.
However, as a rebuttal by Forbes points out, Harris’ article contains more than one misconception. Firstly, he seems to have erroneously lumped Bitcoin together with other alternative cryptoassets and initial coin offerings (ICOs); e.g., he refers to ICO scams to back up his main claim that Bitcoin is a scam (whereas Bitcoin has nothing to do with ICO scams).
The rebuttal goes on to address each of Harris’ three charges against Bitcoin. In regards to the claim that Bitcoin cannot be used as a method of payment, it argues that Bitcoin is used in specific use-cases, and criminal activity is also a use-case (regardless of the morality/immorality factor). Using issues such as transaction fees and delays to discredit Bitcoin also ignores the existence of solutions such as the Lightning Network. In addition, Bitcoin’s value lies in the fact that it is a “censorship-resistant” method of payment, and is not exactly meant to be used for trivial, everyday purchases.
The rebuttal also points out that dismissing Bitcoin as a store of value on the grounds of price volatility is flawed logic, as these price swings do not impact those who are holding Bitcoin for varied reasons such as “political philosophy” or “price speculation”.
Lastly, in regards to Harris’ argument that Bitcoin has no intrinsic value, the rebuttal points out that Bitcoin’s value lies, among other factors, in its value proposition as “digital gold in an increasing cashless society”.