OPINION No-one should beat themselves up for missing out investing in bitcoin.

Anyone who feels that way should instead give themselves pat on the back for not participating in one of this century's most foolish environmental crimes.

At the time of writing, the price of bitcoin is hovering around $26,000, having risen by about 2000 per cent over the course of the year.



But when bitcoin collapses in the coming months, or more likely weeks, questions are likely to be asked about why regulators did so little to prevent this car crash in the making.



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A confluence of factors are behind the "flash before crash", most notably the Chicago Board Options Exchange's unprincipled decision to allow futures trading in the so-called virtual currency which lent bitcoin an unearned air of legitimacy.



The premise for believing bitcoin can sustain or even further increase in value is based on the assumption that demand for the currency is going to grow (virtual currencies are the future right?) and that there is mathematical limit on the amount of bitcoin that can ever be created, of 21 million bitcoins.



Accept that logic and bitcoin can't lose. But please don't.



There are no limits on the number of different virtual currencies that can brought into existence, so the idea bitcoin's rarity makes it an effective store of wealth is fundamentally flawed.

SEAN GALLUP/GETTY IMAGES Bitcoin enthusiasts most commonly liken the virtual currency to gold as an investment proposition, but unlike gold it hasn't yet withstood the crucial test of time.

What makes bitcoin more credible that any of the other virtual currencies already in circulation or yet to be created? Only its name and gullibility.

Yes, you could mount a similar sort of argument against gold, but the yellow metal has the advantage of being tangible, having some real-world uses, having actual rather than artificial scarcity and – crucially – of having stood the test of the time.

Demand for bitcoin is entirely bubble-driven now that it has failed as a currency – as a means of exchange.

At the time of writing, it costs about $40 in fees to make a bitcoin transaction – say to buy a cup of coffee or to pay a phone bill. That is related to the fact that the size of the bitcoin "blockchain" needed to record each transaction has ballooned out to more than 135 gigabytes of data.

Remember, this was a virtual currency that was supposed to be more efficient than the New Zealand or US dollars, which are of course just as capable of being "virtual" and transmitted electronically over the internet in a flash as bitcoin.

Not that the bitcoin fees matter much as it's virtually unusable anyway.

In 2014, New Zealand internet provider Slingshot made headlines by accepting bitcoin for bills, but no-one even noticed when it later shelved the gimmick during an upgrade of its IT systems. Consumer manager Taryn Hamilton recalls "there wasn't a huge demand".

Even US games maker Valve, owner of the hugely popular Steam games platform, whose customers are mostly millennials, stopped accepting bitcoin last week due to its "high fees and volatility".

The practical uses of bitcoin are to pay off ransomware scams or to hide wealth, if say you've made your fortune illegally in China and banking is getting a bit awkward.

But the demand now is all from speculators and the gains people have made from bitcoin will exactly match their and other people's losses as the edifice comes crashing down. It is a zero-sum game.

Bitcoin Cash – which is best is described as a "fork" of Bitcoin assuming it is in fact constrained by the 21 million coin limit, or an outright competitor to bitcoin if it isn't – is an attempt to fix some of Bitcoin's faults, but is too little, too late.

An environmental crime?

The process involved in creating those 21 million bitcoins involves vast banks of computer servers consuming close to 21 million bitcoin-worth of electricity to solve complex algorithms.

Since it is the cost of electricity that determines the economics of bitcoin "mining", it is not much of a simplification to say each freshly-mined bitcoin is now comprised of about 200 barrels of oil (or tons of coal if the servers are in China).

The biggest corporate winner is perhaps US$120 billion graphic card manufacturer Nvidia which has seen its share price double this year, in part on the back of demand for its cards from bitcoin miners.

While centuries of alchemy proved gold was impossible to create or destroy, bitcoin can never be changed back into electricity or anything of actual value.

Green Party MP Gareth Hughes said in July that he thought most people using bitcoin "would be surprised to consider the environmental footprint".

I think they should be outraged.

MGT's new Bitcoin mining facility and mining maintenance staff. We are aiming for the number one Bitcoin mining facility in the world. pic.twitter.com/WJpt3aUetN — John McAfee (@officialmcafee) December 19, 2017

While we are it, the technology behind bitcoin is not going to be as revolutionary as the internet. Yes there will be a few uses for the distributed database technology but only if they are far better implemented than it has been with bitcoin.

Recording the data from car odometers is one I can think of, except that will become less necessary as electric vehicles that can drive 500,000 kilometres take over (that is one technology revolution to actually believe in).

In 95 per cent of applications, if not 99.9 per cent, conventional centralised database technology will win out because it is simple and it works.

Blockchain belongs in the basket of technologies that includes 3D printers that have been over-hyped, before finding some humble uses out of the public eye.

Bitcoin belongs in the history books in the same chapter as the the Dutch tulip bulb bubble.

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