More than a decade ago, Shidan Gouran, an early investor in the blockchain space, got 3000 bitcoins as a gift. It was worth almost nothing back then. Even though now bitcoin lingers somewhere around $58k (as of the time of writing), Gouran is not a fan of bitcoin mainly because of its enormous carbon footprint.
“I do not think it is money. I think a lot of it is nonsense. I think it is horrible for the environment. I do not really like it, to be honest with you,” Gouran said during an interview.
Gouran, the co-founder of Gulf Pearl, a merchant bank in the blockchain sector in Canada, believes that digital assets are here to stay. Non-fungible tokens (NFTs) will shine more than anything this year. However, Gouran is not too excited about blockchain projects that have no particular use. He is not impressed with bitcoin either, which leaves such a huge carbon footprint that it could heat our planet.
In 2011, bitcoin was worth only a dollar. Gouran got a grip on bitcoins even earlier. One of the developers that he knew invested in bitcoin in 2010. Back then he didn’t know much about bitcoin, Gouran admitted. But his friend kept talking about it and eventually gave Gouran 3000 bitcoins as a gift.
“Back then, they weren't worth a dollar even. Bitcoins were worth nothing essentially, 5 cents to nothing. I had this USB key with 3000 bitcoins and left it in my drawer, thinking ‘nice idea, whatever’,” he remembered. Eventually, Gouran started reading more about bitcoin, which led him to invest in the blockchain space. He admired the idea of a decentralized database that not a single person would control, but everybody could write in. In 2013, Gouran closed his business to focus entirely on blockchain.
Is bitcoin money?
Forbes contributor Simon Constable claimed that bitcoin is still a long way from being money. It lacks three main qualities that money has. It does not have a store value because of huge price fluctuations. It is not the medium of exchange as there are not that many things you can buy with bitcoin now. Finally, it is not the unit of account because we do not measure wealth and debt in bitcoin.
I asked Gouran what he thought about that. Bitcoin is not money, he agreed.
However, bitcoin opened the gates to the idea of many tradable things and multiple currencies.
“Look at Europe. Does having one currency work for Europe? No, not really. I mean, Greece and Germany are two very different countries with very different economies. I do not think it necessarily makes sense for them to have the same currency. In the past, having multiple currencies was very difficult, but now we have approached the world where your cell phone becomes your wallet, you can have thousands of things that look like currencies in it,” he said.
As we can have many currencies on our smartphones, and cash registers can handle thousands of different currencies, the idea of digital tradable items, Gouran said, is here to stay.
“You are going to have sporting teams that have things that are tradable and very liquid, like money, and can serve the purpose of money. You are going to have companies with loyalty points, and whatnot that are serving that same purpose, and corporate currencies. You are going to have country currencies come back, all kinds of things,” he said.
Bitcoin is an environmental disaster
More than 60% of bitcoin mining capacity is based in China. A significant portion of bitcoins is mined in Xinjiang, infamous because of human rights abuses and mistreatment of ethnic minorities. Quartz recently published an article on how the pandemic is turning fracking companies into bitcoin miners. Gas flaring is responsible for at least 1% of global carbon emissions. But with bitcoin’s price going up, companies in the US and Russia (Gazprom) are mining bitcoin with flare gas. Some experts believe that this new trend is good for the environment. Others believe that it only drives up the demand and price of fossil fuels.
There are a lot of environmental and ethical considerations about investing in bitcoin. Gouran said that bitcoin consumes approximately 144 kilowatt-hours of energy.
“That is a huge amount of energy, equivalent to probably weeks of electricity usage in your average European home. That is how much it costs just to create one bitcoin and transfer it. It is immoral to have such a system become the future of money. You can imagine a world where just doing payments would cost three times the energy consumption of all of the United States. That is obviously not sustainable in our world with the way it is going right now,” he said.
Citi recently said that bitcoin is at the tipping point of mainstream acceptance. Other wolves of Wall Street, who previously loathed bitcoin calling it a fraud, now predict it becoming a safe-haven asset, and are considering investing in it. Can ethical considerations, as well as environmental concerns, stop bitcoin from stepping over the threshold?
Maybe, Gouran reckons. Especially in Europe, there is a push towards taking the climate into concern. But overall, he thinks it is not going to be taken into account.
“In any case, there is no chance that bitcoin could be in its current form the future of money because we would all die. The world would heat up a lot more than 1,5 degrees celsius if that was the case,” he explained.
On the bright side, other cryptocurrencies, such as Ethereum, ripple, and stellar, consume noticeably less energy than bitcoin, paper, or even Visa transactions.
“One bitcoin transaction is equal to about 700 000 Visa transactions, but one Euthereum transaction is equal to one Visa transaction, and one Ripple or Stellar transaction is equal to a tenth of a Visa transaction,” Gouran said.
So, there are systems to mitigate the environmental impact of using cryptocurrencies.
“I do believe that the digital assets are here to stay. I do not think the current system, and bitcoin with what it offers just as a replacement of gold, is the right way. And the idea of decentralized applications and databases are here to stay, and you will see improvements in those technologies as time goes on,” he explained.
The latest BBC story about how fake Elon Musk giveaway scam cost the man £400,000 illustrates how the hype around bitcoin is also driving the number of scams and frauds up.
According to Security Boulevard, there was a 40% year-to-year rise in crypto-related scams, and it should skyrocket further this year by about 75%. Gouran said that scams have been with us forever. Only in the cryptocurrency world, scams might be less obvious, and it might be easier to get away with them.
“Most ransomware now is collected using Monero, not even bitcoin. And Monero is even more private than bitcoin,” he said.
So, besides more scams, what is next for bitcoin? Reminding that he is not a fan of bitcoin, Gouran said: “You are going to see higher highs and lower lows.”
This year, he believes, non-fungible tokens are going to shine more than anything.
“People trade baseball, basketball cards, in-game assets all the time, now that you can make digital and much easier to do that, of course, people will do that. That is an application of blockchain technologies, in my opinion, that makes sense,” Gouran said.
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