Should I trust bitcoins

Cryptocurrencies: The digital money that lives on trust

At the beginning, 1 Bitcoin cost just 0.08 US cents. Since then, the cryptocurrency has made a spectacular rise. While two pizzas were exchanged for 10,000 Bitcoins in the very first transaction on May 22, 2010, the financial product, which many people mine and redeem digitally using blockchain, but hardly anyone really understands, is already approaching with ten million transactions per month $ 25,000 mark. Tesla boss Musk is already considering converting his company assets into Bitcoin. Financial experts such as the retired university professor Paul Kellermann, author of books such as "Sociology of Money", are all worried: Because with Bitcoin & Co. everything is based on pure trust in the crypto currency, and the bubble could burst if this trust disappeared.

"Wiener Zeitung": You repeatedly criticize cryptocurrencies. What bothers you the most?

Paul Kellermann: That a rogue gives more than he has. When you have money, you have a claim on whoever issued the money. And in the case of non-legal, non-state money such as Bitcoin, the claim cannot be related to a company's own range of goods because it does not exist. Bitcoins and other cryptocurrencies are mainly used in two ways: as a means of payment and as an object of speculation. As an object of speculation, bitcoins themselves become commodities, but only within digital financial trading because bitcoins do not create any real goods. The wide range of goods offered by official currency systems is used as a means of payment as soon as people are ready to accept Bitcoins in exchange for their goods. In this way, the amount of means of payment expands without a corresponding expansion of the real range of goods. Therefore, if the use of cryptocurrencies as a means of payment for real goods were banned, it would be interesting to see what would happen to bitcoins as objects of speculation.


But some - also because of the blockchain technology - already have more trust in Bitcoin than established currencies.

Bitcoin inventor Satoshi Nakamoto (to this day it is unclear who is behind this pseudonym, note) reports that he meant - and this is the decisive factor for the acceptance of Bitcoins - that this system that he created I deserve more trust because everyone can control what is not possible with banks. So if you naively grant him goodwill, then he just wanted to offer a verifiable system that could not be manipulated by others. On the other hand, according to Bitcoin history to date - in addition to the lack of its own range of goods - one can object that Bitcoins are gradually becoming one of the largest objects of speculation today because of the alleged greater protection against manipulation.

But the number of Bitcoins is limited to 21 million, which means that it is a closed system of supply and demand.

This is a legend that is gladly believed. In the system of supply and demand, it is important to keep the supply short, at least according to the assertion, so that as a monopoly one can increase the price. In truth, there are already many derivatives of Bitcoin and the other four thousand or so cryptocurrencies worldwide. The planned IPO also shows that. That means that in reality it is not a closed system or a restricted offer.

How do four thousand different cryptocurrencies attract buyers?

The creators each have to show a benefit that others do not offer: For example, if it can be said that less energy is used to extract the coins or that the transparency of the actions carried out is easier to track.

Cryptocurrencies are sometimes referred to as "digital gold". Is the comparison correct?

This comparison is often used with the also alleged limited amount of gold. In truth, massive amounts of gold are still being mined under inhumane conditions and enormous natural damage. In a clear difference to Bitcoins, gold is tangible, it lasts forever, shines beautifully, has high electrical conductivity and is relatively easy to process into jewelry or other tricks. In short: In addition to its exchange value, which has been recognized from time immemorial, gold has a high use value, while Bitcoin only has a fragile exchange value.

And the price of gold does not decrease with the increasing amount of gold, which should be the case with Bitcoin.

Precisely because of its great utility value at a time when the earth's population and thus the use of gold have grown so rapidly, the gold price will not fall, even if gold is still found. However, because productivity and production have also increased very sharply in the meantime, the increased amount of gold is no longer sufficient, especially for trade. The gold standard was reintroduced at the end of the Second World War with the Bretton Woods Agreement and it was assured that anyone with a dollar bill could go to the bank and get gold in return. But the amount of money required as a means of payment had become so large that the available gold could no longer cover the notes issued. So in 1971 this promise was canceled again by the then US President Nixon - and nothing at all happened because the belief in the dollar bills was now strong enough. The decisive factor was not the gold itself, but the trust that the notes would continue to function as a means of payment. On the edge of a Maltese coin from the 16th century it was already written: "Non aes sed fides." So trust is what defines value, not the metal. That is precisely the sociological aspect that we should take into account: it is (not only) in trade in goods that matters, and not just any substance. And that applies to every means of payment used, regardless of whether it is euros, bitcoins, gold, shells or cigarettes.

If many people trust that they will get goods and services for their cryptocurrency, then it works.

Correct. But only until a certain moment. It is like counterfeit analogue money: as long as it is not recognized as such, it also functions as money.

But bitcoins don't pretend to be dollars, euros, yen or whatever. In this respect, it is not counterfeit money, but simply a new currency that different people - disconnected from the banking system - have identified with one another.

Yes, as long as people believe that they will get something in return, the system works. It is even multifunctional: Bitcoins can be hoarded and speculated with. But if at some point there was nothing more to buy for it, then you would notice: this is obviously a hoax. In the direct exchange of goods thousands of years ago, a cow - "Pecunia" - was exchanged for three goats. In the course of time, the number of those who wanted to buy these animals expanded among the cow and goat breeders, and it was agreed that "worth a cow", so that "Pecunia" was no longer just "cattle" in the Roman Empire, but also "money" as a symbol for the value of a cow, which resulted in a standardized value. As this system has been expanded, the possibility of verification has diminished. So now we have bitcoins globally - they can no longer be checked so easily. And if you can't check, you have to believe.

That said, it's actually a matter of luck now whether I'll get what I think they're worth for it?

If you mean happiness as the trust of others who will exchange your bitcoins for you for any valuable material, then yes. But I don't know whether that can be described as luck.

So your concern is that the whole thing could collapse at some point and the Bitcoins might then be worthless?

That would have been correct more than 30 years ago. Because back then this financial world as we know it today did not yet exist. The then Fed President Alan Greenspan immediately flooded the big crash in October 1987 - at the time quite rightly - with money so as not to let the system collapse. Today people do it without realizing that today the situation is very different. Because now there is so much money that this money can hardly correspond to what is available in terms of material assets. This inequality is possible because the expanded amount of currency is primarily used to purchase financial assets and "concrete gold". That is why the market values ​​and the prices for real estate and thus rents are rising. In other words, a very, very large proportion of the funds available - including the trillions of the European Central Bank - has only potential to do with the real economic system. If all of that money were really used to buy real goods, huge inflation would break out. That used to be the case when a certain amount of money was inflated - hence the term "inflation" - and put into circulation. But you can see for yourself: The ECB has been trying in vain for years to ensure 2 percent inflation by making more and more money available. Now she even wants to buy shares and no longer just bonds from the indebted states.

But there are currencies like the Turkish Lira with high inflation, not to mention the Venezuelan Bolívar - Bitcoins are a sensible alternative.

Naturally. When a currency really inflates heavily, one flees into other currencies; traditionally in US dollars or euros. The dollar has recently lost a lot in the exchange rate against the euro. But the Turkish lira loses even more of its value when it is exchanged for foreign currencies.

But the Bitcoin value shoots through the roof.

Yes, because there are so many people who believe that the value will continue to rise and want to share in the profits. I don't want to blame them for this belief because the connections are really hard to see through due to globalization. The economist John Maynard Keynes once said that the hardest thing is to part with beliefs. And the more such financial products are created, the further the exposure will be delayed. I like to bet myself and I also have stocks, but I wouldn't buy such financial products. In the long run, the value will not stay that high. This is comparable to the US real estate bubble in 2008 or a pyramid game.

What advice would you give to those who already have bitcoins?

Same as with a stock: see if your expectation is that it will keep rising or that it will fall. And if you think the value will fall more sharply: sell immediately! In the long run, the value will not stay that high.

So you would treat bitcoins like a stock? So as an object of speculation?

The difference is: With a share, you are a co-owner of the real company. You are not with a digital finance stock. I would view Bitcoin as similar to a derivative. But it is not really that either, since it is artificially created using mainframes and complex mathematical manipulations. The core of Bitcoins is actually likely to be limited in number at some point due to the ever increasing production effort. This would also include the alleged limit on the quantity if derivatives were not offered over and over again.

Despite all the criticism of cryptocurrencies, the blockchain technology used must be viewed separately from it. Are there any applications that you find positive?

Yes. But the question is always: How can this still be controlled? My fear is that it will become more and more difficult. Everything is becoming much more complex and developing a certain momentum of its own. The ECB, for example, is trying to manage legal money using blockchain. However, I fear that even the people in the ECB do not really know what money is, but only know trust in money as a special organizational tool. Because the euro - but that's because of the legislation - is not really tied to economic development. Only auxiliary structures have been created there. Of course, money has the great advantage of greatly reducing the complexity of the interrelationships. And as long as you can use this money and buy something for it, it works. If conspiracy theorists were to stir up doubts about the euro in favor of Bitcoin, more people would also flee in Bitcoins. The trust lasts as long as something desired can actually be achieved at the end of the chain for the symbol "money". It can best be compared to a voucher: if it is not redeemed, it has at best only museum value.