Bitcoin is dead again...for the 313 time!

In case you missed it, Bitcoin just died… again! As many readers of cryptocurrency news are aware, Bitcoin has died approximately 313 times as of Oct. 2018. At least a few times each month another obituary by a supposed financial expert will pronounce Bitcoin on death’s doorstep. Many of these articles are collected and posted to Bitcoin Obituaries

The articles posted here often offer the same reasons why Bitcoin and other cryptocurrencies can’t possibly succeed. I will list a few before offering counter-arguments:

1. The transaction costs are too high per transaction

2. The transactions take an hour or more

3. The energy costs are too high for proof-of-work mining

4. They aren’t tethered to anything physical

5. There is no use-case for them

6. Only criminals will use it

   I could list many more arguments why Bitcoin, and by extension blockchain technology, is supposedly going to die at any moment, but I think that is enough for starters. Here is the main problem with all these arguments, they focus all their animus on Bitcoin, which is obviously the most branded of all the cryptocurrencies. I know this next comment will upset the loyal Bitcoin maximalists out there, but Bitcoin today is like the Model T compared to the high performance vehicles on the road today, and the even better vehicles planned for tomorrow. With that being said, Bitcoin does have a strong community of developers looking to upgrade it and address many problems, but I’m going to focus attention on the many other cryptocurrency projects that are starting up without those problems to begin with.

7. Transaction costs: Bitcoin transactions are only about $0.22 per transaction at this point. Many other cryptocurrencies are far cheaper at less than a cent. For example Stellar Lumens (XLM) is only $0.00000037945 per transaction. Some, like EOS and STEEM have completely free transactions.

8. Tx Times: It is true that Bitcoin is the slowest of all the cryptocurrencies at this time, often taking an hour or longer. Bitcoin’s Lightning network is a scaling solution that has been in development for years, and is currently in the testnet phase. Lightning will allow transactions to take place in seconds. Several other cryptocurrencies have very fast networks including both Ripple (XRP) and Stellar Lumens (XLM) which can both process approximately 1000 transactions per second. For the end-user, this means a wait of no more than a few seconds. In contrast, the EOS network is currently doing 5,000 transactions per second.

9. Energy: It is true that Bitcoin and other Proof-of-Work mining computers use a tremendous amount of energy. It is also true that many other consensus algorithms already exist that do not require the “work” that uses all the energy. Instead of mining machines, these coins run masternodes on common Virtual Private Servers like Amazon Cloud and Microsoft Azure. Proof-of-Stake coins have been the dark horse of 2018, churning profits to investors even in the Bear Market. They are far more “green,” energy efficient, and do not require specialized hardware like ASICs to run.

10. Tethered: This argument also ignores that fact that many cryptocurrencies already do exist which are tethered to the U.S. dollar (Tether-USDT) or Gold (DigixDAO). The developer community is still in competition to create the perfect “stablecoin.” Some of the more exciting ones will attempt to create price stability through complex smart contracts and market economics to “mint” and “burn” an underlying cryptocurrency to control the value of their stablecoin. Basis and Haven are both examples of stablecoins currently in development.

11. Use-Case: Those who claim there is no “use-case” for all cryptocurrencies, really need to take a long look at the growing ecosystem of Decentralized Applications (Dapps)such as those built on the Ethereum, EOS, STEEM and Blockstack ecosystems. There are many apps that can already do a fascinating variety of tasks, like provide encrypted messaging, replicate popular social media outlets, web publishing , encrypted cloud file storage and more. These decentralized applications are still just scratching the surface as many more ambitious projects are still in development.

12. Criminals: It might be true that some criminals latched on to Bitcoin in it’s early years, but that in no way defines how they should be used. Criminals also were early adopters of other technologies like high-performance vehicles used to outrun police during prohibition days. Society did not abandon vehicles because they were used by criminals. Many other people use cryptocurrency, including 26 million Americans and many more are interested including half of all U.S. millennials,. Other organizations that are interested in cryptocurrency and blockchain technology include virtually every large financial institution and at least a dozen nations including Switzerland, Russia and China.

    A review of articles posted on cryptocurrency-focused news sources like Coindesk, Cointelegraph and Cryptocoinsnews provides any serious researcher a wealth of data to inform their writing on these topics. Why is that instead of doing that, many of them continue to proclaim that “Bitcoin is Dead?”

The obvious reason is that many of those writers have no incentive to read those articles because they work for opposing financial entities. The other reason is that many of them are likely exposing themselves to media selectively. Selective exposure refers to an “individual's tendency to favor information which reinforces their pre-existing views while avoiding contradictory information.” It is also called confirmation bias, which is the “tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.” (Sullivan, 2009)

Selective Exposure theory predicts that an individual will seek information that reinforces their existing beliefs, and avoid information that challenges their existing beliefs. This pattern of behavior among groups of people leads to an effect often called the “echo chamber” where an individual no longer encounters viewpoints outside their own.

Selective exposure, sometimes called cognitive bias theory, is rooted in Cognitive Dissonance Theory. This the phenomenon of mental discomfort or psychological stress experienced by a person who simultaneously holds two or more contradictory beliefs, ideas, or values.

A person who experiences internal inconsistency tends to become psychologically uncomfortable, and so is motivated to reduce the cognitive dissonance, by making changes to justify the stressful behavior, either by adding new parts to the cognition causing the psychological dissonance, or by actively avoiding social situations and contradictory information likely to increase the magnitude of the cognitive dissonance(Festinger, 1957). This discomfort is triggered by a situation in which a belief of a person clashes with new evidence perceived by that person. They attempt to resolve this contradiction in order to reduce their discomfort.(Knobloch-Westerwick, 2009)

Several studies that have attempted to measure selective exposure (Garrett, 2009). Garrett concludes that when people must choose among one-sided partisan sources, seeking opinion reinforcement will be equivalent to avoiding challenges.

Media omnivores are defined as individuals who have high levels of knowledge of the arguments for and against their preferred views, while selective reinforcers were most knowledgeable about arguments in favor of their preferred views. (Hennessy, 2017).

At this point you are probably asking yourself, "What can we do about it?"

Unfortunately, not much really. The best thing you can do is post constructive criticism to the "Bitcoin is Dead!" articles and explain why it isn't so, as politely as possible. You may have noticed that many of these articles suspiciously turn off the comments section, as if to confirm that they would rather just hear the echo chamber, and not you.

For examples, shortly after I posted this article, a person who had acquired a lot of "Steem Power" by selling toys online, decided to Flag this story for apparently no reason other than they didn't like some of the opinions expressed here, which ironically is exactly the point of this article.

In summary, cryptocurrency skeptics will continue to read the news that aligns with their existing opinions, and respond with surprise and indignation when Bitcoin and it’s offspring are still not dead.

In contrast, blockchain investors and enthusiasts are encouraged to be media omnivores and not fall into the habit of only reading the articles that they agree with. It is only through the recognition and admission of its shortcomings, and the critical debates and problem-solving that this inspires, that Blockchain technologies can move forward and continue to advance in development and gain global adoption.

Sources:
Festinger, L. (1957). A Theory of Cognitive Dissonance. California: Stanford University Press.

Garrett, R. K. (2009). Politically motivated reinforcement seeking: Reframing the selective exposure debate. Journal of Communication, 59, 676–699.

Hennessy, M., Hawkins, L., & Jamieson, K. H. (2017). The 2014 walrus haul out: a case study of selective exposure to environmental news coverage. Environmental Communication, 11(1), 63-74.

Sullivan, Larry E., ed. (2009). "Selective Exposure". The SAGE Glossary of the Social and Behavioral Sciences. SAGE Publications. p. 465. ISBN 978-1-4129-5143-2.

About:
Michael Meyer is a graduate student at the Zimmerman School of Advertising for Mass Communications at the University of South Florida. He earned his Bachelor’s degree in multimedia journalism and production from USF in 2005. This blog focuses on various aspects of mass communications research and practice, and relates these findings to the many current technological shifts that are impacting communicators; including social media, data mining, and the emerging field of blockchain technology.