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PayPal founder says that Bitcoin is a scam

Bill Harris, the co-founding (but short-lived) CEO of Paypal says that Bitcoin is a “colossal pump-and-dump scheme”. He claims that the digital currency cannot be used for (non-criminal) transactions, has no intrinsic value and is too volatile to be a reliable investment option.

His replacement as CEO of Paypal disagrees. Peter Thiel has famously compared Bitcoin to gold, and believes that it could revolutionise the financial world. At the moment, however, the cryptocurrency is being treated as a speculative investment, with coins being bought and sold in exchange for traditional cash rather than being used to make purchases.

The way Bitcoin is generated is also a cause for concern. New coins are created by “mining”, which requires significant amounts of processing power. The value of the cryptocurrency means that criminal groups are finding ways to create their own. Crypto-jacking, which is where a virus takes over a significant portion of a computer’s processing power to generate coins for the hacker, is becoming increasingly prevalent.

Harris’ contention is that the price of Bitcoin is way above any real value that can be gained from owning the actual product. Given the massive (and well publicised) volatility in the price of the coins it is hard to argue, although it is worth noting that the more usable the digital currency becomes the more intrinsically valuable it should be.

The main benefit of cryptocurrency is anonymity. Transactions using the digital currency cannot be traced, which makes it perfect for hiding assets and purchases from regulatory bodies. Harris asserts that this element of the coins means that people are not declaring income from it, leading to tax avoidance. His claims are perfectly possible, but are so far unproven.