The European Central Bank bureaucrats Bindseil and Schaaf created a paper about Bitcoin that only two representatives of the traditional financial system could write. In their paper, “The Distributional Consequences of Bitcoin,” they dismiss Bitcoin’s potential and critique its investment narrative. As expected their paper if filled with inaccuracies and miscalculations so here is a rebuttal.
1. Bitcoin as a Speculative Asset Lacking Economic Function
Bindseil and Schaaf’s Claim: They argue that Bitcoin has not fulfilled its original purpose as a global payment system and has instead transformed into a speculative investment without providing any real economic utility.
Rebuttal: The fact that Bitcoin has not yet been adopted as a mainstream payment system is a sore topic in the blockchain space. Part of a very , this does not negate its long-term potential. Early-stage technologies, including transformative ones like the internet, took years to gain widespread adoption and practical use. Bitcoin, with its decentralized and censorship-resistant structure, is laying the foundation for a future where individuals can bypass traditional financial institutions. Why? Because they can be restrictive or discriminatory and do not really support a free market.
Although volatility currently limits its use as a payment system, technologies like the Lightning Network are emerging to make Bitcoin faster and more efficient for everyday transactions. Moreover, viewing Bitcoin solely through the lens of its current use overlooks its potential as a hedge against inflation and financial instability. Use cases that are becoming increasingly relevant in today’s global economy.
2. Redistribution of Wealth
Bindseil and Schaaf’s Claim: They suggest that Bitcoin creates a redistributive effect where early adopters benefit at the expense of latecomers and non-holders, resulting in social harm.
Rebuttal: The redistribution of wealth due to early adoption is not unique to Bitcoin—this phenomenon is observed with any transformative technology. Consider the early investors in tech companies like Amazon, Google, or Tesla. Those who recognized the potential of these companies early on were rewarded, but that doesn’t mean latecomers were left impoverished.
On the contrary, the rise of these technologies brought about economic growth, job creation and broader societal benefits. The same can be said for Bitcoin. And the wider blockchain economy. Its decentralized nature provides an alternative to traditional financial systems, especially for individuals in countries with unstable currencies or oppressive governments.
Bitcoin’s rising value is a reflection of growing demand for financial sovereignty and while early adopters may gain, the wider adoption of Bitcoin will enable financial freedom and economic empowerment for millions of people globally.
3. No Intrinsic Value or Cash Flow
Bindseil and Schaaf’s Claim: They argue that Bitcoin has no intrinsic value because it doesn’t generate cash flow like traditional assets such as stocks, bonds, or real estate.
Rebuttal: Bitcoin’s value proposition is not tied to traditional cash flow metrics but rather to its unique properties as “digital gold”. Just as gold has value due to its scarcity, durability and history as a store of wealth, Bitcoin has value because it offers scarcity (capped supply of 21 million), security (backed by cryptographic proof) and portability. In fact, Bitcoin improves on gold by being far more portable and divisible, making it accessible and useful in the digital age.
The argument that Bitcoin lacks intrinsic value because it doesn’t generate cash flow is misguided. Many stores of value, such as gold, do not generate cash flow but hold value due to their scarcity and the role they play in hedging against economic risk. Bitcoin fits this model and could eventually serve as a global reserve asset, especially in a world increasingly wary of fiat currency debasement.
4. Bitcoin is Not a Productive Asset
Bindseil and Schaaf’s Claim: They claim Bitcoin does not contribute to increasing the productive potential of the economy and its wealth effects benefit early holders while impoverishing non-holders.
Rebuttal: Bitcoin’s value doesn’t need to be tied to traditional productivity metrics for it to provide economic benefits. In fact, Bitcoin can contribute to economic productivity in indirect but meaningful ways, particularly in emerging markets and countries with unstable financial systems. For example, in countries like Venezuela, Zimbabwe and Nigeria, citizens use Bitcoin to store value and protect themselves from hyperinflation.
Moreover, as an asset class, Bitcoin is increasingly attracting investment from institutional players and serving as a hedge against financial instability, which has the potential to make markets more resilient. It also offers an escape route for the unbanked. About 1.7 billion people globally. who can now participate in the global economy without relying on a traditional bank. Therefore, Bitcoin plays a broader role in enhancing financial inclusion and supporting economic freedom, particularly in regions where access to traditional financial systems is limited.
5. Energy Consumption and Social Costs
Bindseil and Schaaf’s Claim: They critique Bitcoin’s proof-of-work system for being energy-intensive, suggesting that its high energy consumption is socially and environmentally harmful.
Rebuttal: While Bitcoin’s energy consumption is significant, this argument often overlooks the larger context. Much of the energy used for Bitcoin mining now comes from renewable sources such as hydroelectric power, particularly in regions where energy is abundant but difficult to transport or store. Bitcoin’s energy use is part of a broader conversation about how society values resources. Critics often compare Bitcoin’s energy consumption to that of individual countries, but fail to compare it to the traditional financial system, which also has a significant environmental impact.
For example, the global banking system consumes vast amounts of energy in running data centers, office buildings and transportation networks. Furthermore, as Bitcoin’s technology matures, solutions such as proof-of-stake (used by other cryptocurrencies) or more energy-efficient consensus algorithms could mitigate energy concerns without sacrificing decentralization.
Missing the Point
Bindseil and Schaaf’s arguments are largely rooted in a short-term, traditional understanding of value and economic function (or disfunction, depending on whose side you are on). Bitcoin represents a paradigm shift in finance. They fail to grasp that. Offering decentralized, permissionless financial infrastructure that stands to democratize access to wealth and financial tools was never going to be a straight simple road. While it may not currently function perfectly as a payment system, Bitcoin’s role as a store of value and hedge against traditional financial uncertainty is undeniable.
Rather than viewing Bitcoin as a speculative bubble, it should be seen as a long-term bet on digital sovereignty and financial innovation. Much like how early tech giants transformed the landscape of commerce and communication. Bitcoin’s current status will not necessarily reflect it’s future.
Author Profile
- Lucy Walker covers finance, health and beauty since 2014. She has been writing for various online publications.
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