Is Bitcoin Safe? Experts Pick Sides
Perhaps you’ve heard about the U.S. dollar’s recent strength as well as the torrid pace with which the stock market has set all-time records. But guess which type of asset actually performed the best in 2016. That’s right; you won big if you bet on bitcoin, with the cryptocurrency more than doubling in value over the calendar year. In fact, it wasn’t even close, as bitcoin’s 126% gain far outpaced the likes of Brent crude oil (53%), sugar (30%), silver (18%), and the S&P 500 (10%). Even more astounding, the dollar price of one bitcoin has increased from just $0.06 in July 2010 to $1,182 as of February 24, 2017.
Still, it hasn’t always been smooth sailing. The value of a bitcoin plummeted more than 78% between November 2013 and January 2015 before subsequently rebounding. And when you couple such volatility with the currency’s relative lack of regulation, dark-web origins and black-market connections, it’s understandable why many people still question its safety.
In the interest of making this cryptocurrency a bit less cryptic, we posed one simple question – “Is bitcoin safe?” – to a panel of leading experts. You can check out their bios and responses below. And if you’d like to join in the debate, feel free to share your thoughts in the comments section at the end of the page.
Bitcoin Is Not Safe
“Due to the nature of Bitcoin, its value is inevitably very volatile. By design, the Bitcoin supply is capped at a fixed amount in the long run. Because of its limited supply, the value of Bitcoin is destined to increase relative to the overall economic activity. This tends to encourage hoarding of bitcoin, which limits market liquidity. The result is that a small number of players, many speculators, can influence the Bitcoin value significant in a short period of time.”
- Baizhu Chen // Associate Professor, University of Southern California
“The perceived value of any currency is based on what is standing behind it. For example, the dollar has the reputation and the history of the U.S. economy under-pinning the value. It has been a while since we have had a precious metal (gold or silver) as a basis for our currency. That said we still have the history and reputation of the country supporting the dollar. In the European Union, they have a similar foundation for the Euro. Bitcoin has no such under-girding. The only value is a perceived value by those who use it.”
- Ken Dick // Research Fellow, University of Nebraska at Omaha
“Bitcoin has no real value other than the artificial value set by the people trading in Bitcoin. To me, this is like trading in stock of a company who has no product or service, only stock. People will argue that bitcoin is not like stock, but is a currency and therefore will always have value. This is a false assumption since there is nothing standing behind the value of Bitcoin. We have all seen currency being devalued overnight even if there is a government standing behind it. Also, all it would take is a major country to declare Bitcoin illegal because it supports money laundering or some other reason, to cause the value to drop.”
- Doug Jacobson // Professor, Iowa State University
Bitcoin Is Safe
Bitcoin Can Be Safe And Risky
- “Regulators have, at least historically, been quite accommodating to cryptocurrencies, probably because their regulatory frameworks already handle the notion of multiple currencies -- given that some of these currencies are backed by nothing more than the say-so of central bankers in small countries, it is a no brainer that Bitcoin, with its strong guarantees, fits well into the existing frameworks. And while I believe the quantum computing threat is real, it is also nowhere in the near future and progress towards it will be slow and in measured steps that give us plenty of time to react.”
- Emin Gun Sirer // Associate Professor, Cornell University
“Recent research by the academic community (Garay et al. and Pass et al.) has formally proven that Bitcoin’s core Nakamoto blockchain protocol satisfies consistency and liveness, assuming that the attacker controls less than 51% of the hashpower.”
- Elaine Shi // Professor, University of Maryland
“Bitcoin is safe, if you use it appropriately as a medium of exchange. Its algorithms have been extensively reviewed and it has a reasonable track record in practice, albeit with some hiccups along the way.”
- Carl Landwehr // Research Scientist, George Washington University
Image: StockFinland / iStock.
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