It is important to consider that bitcoin has become unsuccessful because it has been perceived as a speculative bubble in the economy by some of the famous economists, such as Paul Krugman who is a Keynesian economist. Paul declared bitcoin as a fraud and a bubble. It also has been perceived as economic bubbled by Nobel Prize winners, involving Richard Thaler, Joseph Stiglitz, and Robert Shiller. Whereas, bitcoin was also tagged as the mother of all bubbles by Nouriel Roubini who is the leading professor at the New York University. Similar perspectives were also shared by biggest investors like George Soros and Warren Buffet along with famous business executives like Jack Ma and Jamie Dimon. Although one of the biggest venture capitalists of bitcoin, Tim Draper perceived bitcoin to be much bigger than the industrial revolution, the Renaissance, the Iron Age, and the Internet.
Another key reason that has led to the failure of bitcoin is its consumption of energy, especially electricity required by its mining. It was claimed by The Economist that even if modern facilities have been used by all of the miners, the calculated consumption of electricity will result into 166.7 megawatts annually. Whereas, it was also estimated that by the end of 2017, around 1 and 4 gigawatts of electricity would be consumed by the international mining activity of bitcoin. It was also found that around six percent of the total power consumed by the international banking sector, whereas, around 2% of international power is still consumed by the bitcoin.
To reduce the costs, the setup has been maintained by miners of bitcoin in places such as Iceland where there is free cooling Arctic air, and there is cooling and cheap geothermal energy. For lessening costs of electricity, hydroelectric power is also being used by miners of bitcoin in Austria, Washington, Quebec, and Tibet. One of the biggest attractions for these miners have always been bigger energy surpluses such as Hydro Quebec. It was also found that in China most of the mining of bitcoin is performed as its government subsidize the electricity.
Another significant factor that has driven lack of success by bitcoin are the concerns related to the pyramid scheme and the Ponzi scheme. Concerns related to perceiving bitcoin as a Ponzi scheme have been raised by different journalists and economists and the central bank of Estonia. Bitcoin was also pronounced as a collective delusion and compared to fraud considered by the real Ponzi scheme by a famous law professor, known as Eric Posner in the University of Chicago. Although it was concluded by the World Bank in 2014 that bitcoin is not similar to any deliberate Ponzi scheme. In contrast to this, concerns related to perceiving bitcoin as a pyramid scheme were raised by the Swiss Federal Council. It was also marked as a pyramid scheme by Howard Marks who is a renowned billionaire.
Several other main reasons behind bitcoin failure have been its vulnerability to theft through hacking, scamming, and phishing. As of 2017, around 980,000 bitcoins were stolen from the exchanges of crypto currency. Along with this, bitcoin was also found to be used by criminals and thereby attracted the huge attention of the media, law enforcement agencies, legislative bodies, and financial regulators. An intelligence assessment was prepared by the FBI in the United States and a warning related to investment schemes through the usage of virtual currencies was also issued by the SEC.
It was also asserted by different news outlets that bitcoins were also used for the purpose of purchasing illegitimate goods. Several other crimes and money laundering were found to be encouraged by the anonymity of bitcoin. Other than this, bitcoin remains unsuccessful due to a ban on its advertising on social media websites, such as LinkedIn, Snap chat, Twitter, and Facebook. Its advertisements were also banned on other websites such as Weibo, Tencent, Baidu, Mail Chimp, Bing, and Google.
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