An expert in the field of digital economy, Dr Eyjolfur Gudmundsson puts forward his point of view on why the concept of Bitcoin can’t be trusted
Bitcoin. Cryptocurrency. Perhaps one of the more recent tech trends that people rave on about and integrate in higher-level commercial businesses. To say that it has seen loads of volatile activity in the past year or so is an understatement.
However, there are experts in the monetary management field (physical or digital) who do not trust the system. Take for instance Dr Eyjolfur Gudmundsson, an economist who works at CCP Games. You may recognise the company as the creator of EVE Online, arguably the biggest mass multiplayer online game in the world that stands alongside the online games juggernaut World of Warcraft. Both of CCP Games’ titles, EVE Online and Dust 514, run on multiple virtual currencies: ISK, Auram and PLEX. All three are interconnected, have been kept stable in the in-game economy and can be traded for real money in certain instances.
Speaking to Polygon, Dr Gudmundsson found it interesting that the people behind cryptocurrencies distrust governments. “[They] create a system that is supposed to be closed, just a fixed amount of money, and nobody can create fiat monies, no bankers will benefit from it. And yet, they don’t tell you who is behind it, and they’re telling you the code is secure.”
He pointed out the irony that while the creators distrust the government and preach that statement, they want its users to trust something that’s just a code written by unknowns. “There’s a notion of people who did this originally, who are sitting on millions and millions of Bitcoins and will cash out at some point.”
For context, EVE Online is infamous for its players building in-game corporations and even attempt in-game scams similar to a Ponzi scheme using the aforementioned virtual currencies. The biggest one in the game was done in 2011 when two players convinced 4,000 in-game players to invest ISK in a proxy company called Phaser Inc. The payout was 1,034 billion ISKs, which is the equivalent to US$ 51,677.50.
Because of this history of in-game politics and corporate mindgames, Dr Gudmundsson feels that Bitcoin could be following a cycle of an in-game EVE Online scam. “People try to figure out a scamming system that they will actually build some value [onto], make people trust it. [Once it’s] there, they break it and profit from it.” He asked around and talked with people enthusiastic about cryptocurrency, and they defend the system not being a scam because Bitcoin code is safe.
“[I reply to them] OK, are you absolutely sure that this code can’t be changed, because I don’t know the code and I don’t know the technology behind the code, but I have to trust it to use it. So how are they going to convince people all over the world that this is trustworthy if there is no government behind it?”
He brought up his game as an example, where the digital currency trifecta is monitored and maintained by CCP Games, essentially the government body of the game. As long as there are people playing EVE Online, the currency will continue to have value. “That’s the trust. They know if they buy a PLEX [for a month’s worth of game time], the PLEX will be redeemable for ISK in the future. They would rather keep a PLEX on their account than too much ISK because ISK fluctuates in value as well. We have inflation in Eve, and that can change over time.”
Despite this comparison, do you think Bitcoin and its data-mining protocol is anything but an elaborate scheme?