A lot of people who have been pushing for the adoption of cryptocurrencies including sheer scammers who want to convince unsuspecting people to join their ponzi schemes have often quoted Bill Gates as having expressed belief in cryptocurrencies
Of course when the second richest man in the world (yes, he was recently surpassed by Amazon’s Jeff Bezos) says something, you sit and listen especially if you are the type that wants to get rich quick and would fall for ponzis. Even those who have bought cryptos and are not part of any scheme really have also taken comfort in the belief that Bill Gates seemed to endorse cryptos.
The quote that everyone in the crypto world loved to quote is this one from a Bloomberg interview:
Well, Bitcoin is exciting because it shows how cheap it can be. Bitcoin is better than currency in that you don’t have to be physically in the same place and of course for large transactions currency can get pretty inconvenient.
Now Bill Says Cryptos Have Caused Death
Fast forward to today and social media is ablaze, people commenting on Bill Gates’ more recent comments on cryptos. This is what he said on Reddit Ask Me Anything:
The main feature of crypto currencies is their anonymity. I don’t think this is a good thing. The Governments ability to find money laundering and tax evasion and terrorist funding is a good thing. Right now crypto currencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and crypto currencies is super risky for those who go long.
But Has Bill Really Changed His Mind?
The truth is Bill did not start expressing the reservations above recently. In the 2014 Bloomberg interview I initially quoted Gates didn’t just say just the one thing. It’s a classic case of people hearing what they want to hear. Bill Gates was already skeptical about the supposed anonymity of crytpocurrencies particularly bitcoin transactions.
The customers we’re talking about aren’t trying to be anonymous. You know they’re willing to be known, so the Bitcoin technology is key, and you could add to it or you could build a similar technology where there’s enough attribution that people feel comfortable that this is nothing to do with terrorism or any type of money laundering.
Bill has always viewed the anonymity characteristic as problematic. He was not comfortable with the fact that there is no discretion between transactions, every transaction goes through. This means you can sell drugs, or even humans more easily.
In the Ask Me Anything, Gates responded to a comment that said the problematic transactions he highlighted could still be done with cash just as easily and as anonymously. He correctly responded that cash requires you to be present for the transaction to happen which then makes it more difficult for criminals particularly for things like kidnapping.
Gates Is Not Entirely Right
Crytocurrencies are not as anonymous as people think. First these currencies are bought on exchanges and sold on exchanges and the exchanges can be regulated or even shut down. As a result the exchanges have KYC requirements just similar to banks or sometimes even more stringent.
The bigger misconception that Bill fell into is assuming that cryptos are anonymous by deesign. They are not. Cryptos are pseudonymous meaning that crypto transactions can be tracked by forensic audit since they are recorded in the blockchain. This is why the criminal elements on the dark web use some coin mixing serves that make their transactions more difficult to trace.
Even If He’s Right
A lot of commentators on social media are using the age old knife analogy to dismiss Bill Gates’ comments:
A knife in the hands of a surgeon saves lives but the same knife in the hands of a terrorist…
But It’s Not Just The Crime Bill Is Concerned About
Bill Gates also spoke about the economics of the whole thing. He commented on the “speculative wave” of ICO’s and cryptocurrencies calling them super risky. This is probably retrospective after seeing how the cryptos plummeted after some crazy growth last year.
Billionaire Buddy Consensus
Fellow billionaire and friend of Biill Gates, Warren Baffet dismissed bitcoin and cryptocurrencies early January this year saying that it’s all gonna end badly. Baffet is an undisputed maestro when it comes to investing and understanding markets. I would take his caution seriously.
I Agree With What Gates Said In 2015
In his interview with Backchannel in 2015 Bill Gates expressed optimism about cryptocurrencies and the problems they solve. He however expressed that bitcoin would not be dominant in the future. I agree with this position and I already discussed this here on Techzim when I gave a Zimbabwean perspective to bitcoin.
Blockchain Yes, Cryptos I Don’t Know
My response to questions around cryptocurrencies is usually that I am very bullish about the blockchain technology and it’s use cases. I don’t see it going anywhere, a lot of applications are going to be built on it and it will be part of our daily lives. That does not necessarily translate to cryptocurerencies although they brought blockchain innovation to the world.
If cryptocurrencies survive, I don’t think the dominant one will necessarily be bitcoin because of the complexity of the blockchain it’s built on (possibly giving it less utility) and the cost and speed (slowness) of transactions.
The billionaires have spoken and it is wise to listen. Let’s probe more and be careful even as we are excited about the possibilities of this new technology. As with all life, bitcoin and cryptocurrencies are a paradox, the challenge is on how to get the paradox into balance.