A new article highlights the ‘problems’ of Bitcoin: debunking the criticisms.
On February 22nd, the European Central Bank published a new article against Bitcoin titled “ETF approval for bitcoin – the naked emperor’s new clothes.” According to the two authors, Ulrich Bindseil and Jürgen Schaaf, the recent approval of spot ETFs does not affect the valuation of the asset in any way.
The words used at the beginning of the article immediately convey the authors’ thesis:
“Bitcoin has failed on the promise to be a global decentralised digital currency and is still hardly used for legitimate transfers. The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.”
The main points argued in the article are three:
“Bitcoin transactions are slow, costly, and inconvenient. Apart from illicit activities, Bitcoin is rarely used for payments. As seen in El Salvador, despite full government support, Bitcoin has failed to establish itself as a means of payment.
Similarly, Bitcoin is not yet a reliable investment. It generates no cash flow or dividends, cannot be used productively, and offers no social benefit or subjective appreciation. According to the authors, Bitcoin’s value is currently zero.
Finally, using the Proof of Work consensus algorithm, mining continues to pollute the environment in the same way as other countries.”
Debunking the criticisms
Regarding the first point, the authors of the article most likely refer to on-chain transactions. However, stating that on-chain transactions are slow, costly, and inconvenient is rather misleading information. Firstly, fees on the first layer of Bitcoin do not depend on the amount sent but on the weight in virtual bytes of the transaction. A person might spend €2 in fees to send €100, just as a company might spend the same amount to move thousands or millions of euros in an international transaction. The timing of transaction confirmation then depends on network congestion and the fee set by the sender. If one desires a quick confirmation, they must pay the necessary fee for the first available block.
Speaking of micro-payments, the Lightning Network protocol, which allows thousands of transactions per second with minimal fees, is not even mentioned in the article. And all this can be done without intermediaries, every day, 24 hours a day.
In the second point, the authors believe that Bitcoin is currently not a reliable investment. According to them, if an asset does not generate any cash flow or dividends, or cannot be used productively, or offers no social benefit or subjective appreciation, then its value should be zero. However, the value of Bitcoin is determined by market demand and supply, not by yield. If only an asset capable of producing returns were classified as a valuable asset, it would follow that ordinary consumer goods, precious metals, works of art, and collectibles would be devoid of any value. In the long run, Bitcoin allows people to preserve their purchasing power and fight the devaluation of fiat currencies.
Furthermore, claiming that Bitcoin offers no social benefit is false. Witness to this are the circular economies that have emerged in countries like El Salvador, Guatemala, Costa Rica, Peru, and Africa. In such circumstances, projects have been born that have proven to be essential for local communities. Examples include various mining projects that help reduce methane emissions into the atmosphere or companies like Gridless, which, through Bitcoin mining, provide electricity to entire rural African villages.
Lastly, the third point is easily refutable. The assertion that mining continues to pollute the environment is far from true. As evidenced by the increasingly numerous studies, mining has become one of the most sustainable industries in the world. In recent years, data has shown an increase in the use of renewable energy and a constant reduction in greenhouse gas emissions. Daniel Batten, a researcher and CEO of CH4 Capital, has demonstrated how the sector utilizes more than 50% green sources, positioning itself as the industry with the greenest energy mix globally. Other scientific papers have documented how mining can promote energy efficiency and be used as a stabilizer for electrical grids.
