Tencent seems determined to give bitcoin a short shrift despite its whiz-bang performance.
At Tencent’s latest closed-door investment meeting, a yearly meeting of its CEOs to share insights on frontier areas, James Mitchell, the chief strategy officer (CSO) and senior vice president of Tencent, shared his thoughts on bitcoin through a presentation titled “Forecast and Insights”.
James joined Tencent in 2011 and is responsible for the tech mogul’s strategic planning and implementation, investment and acquisition as well as management of investor relations.
“Bitcoin, like diamonds, has no intrinsic value. Its high price is largely driven up by its scarcity, to say nothing of the fact that now nearly 80% of all the 21 million bitcoins have already been dug up. Surely, Tencent will invest in scare resources, but not bitcoin,” said James.
“As an outsider, I will be appealed more to the future value of bitcoin,” added James.
While it may appear that the price of bitcoin is swinging up and down in line with its cost, the fact is just the opposite, said James.
The cost for mining a bitcoin, in general, rises and falls with its difficulty. As the price of bitcoin swells up, more people will be drawn to join the mining roster, which will accordingly add to the hashing power of the mining pool. However, this will only but increase the difficulty in mining bitcoins and its production cost.
“Cost, in this case, can’t be used to measure the value of bitcoin, because it is a loop computation,” said James.
At the meeting, James also delved into the issue of “Bitcoin Paradox”. The value of bitcoin, as he sees it, can’t be determined so long as the proportion of bitcoin in the future cryptocurrency market can’t be predicted. At the end of the day, what bitcoin controls through its algorithm is only the 21 million cap, but not other cryptocurrencies.
Even so, James did offer a silver lining about the future value of bitcoin amid all this grim talk. When electricity becomes the most important factor, the value of energy is then put on a par with the universal equivalent, which can be exchanged like the banknotes we use today. Although the digital currency is still in its early days, it represents a future in which energy is the new currency.
That said, recent days have seen Tencent shelling out money in a wide spectrum of areas, but not cryptocurrencies in any form.
Nonetheless, this doesn’t mean that Tencent will shun the underlying technology of bitcoin, blockchain, altogether. Actually, Tencent issued its white paper on the application of blockchain back in April 2017. Later, it launched its blockchain open platform Baas (blockchain as a service). And it has since applied blockchain in areas including supply chain finance, logistics, evidence storage and locating missing persons.
Whereas, Tencent’s archrival Alibaba had already mapped out the blueprint for its technology development BASIC (Blockchain, AI, Security, IoT and Cloud Computing) by the end of 2011. So far, Alibaba has applied blockchain in tracking the origin of the food products (powdered milk and Maotai spirit) sold on Tmall.com and the whereabouts of the donations through Ant Love.
Nobel Prize winner Bengt Holmstrom warned the central bank that cryptocurrency would lead to catastrophe. “That’s an example of where you think you’re doing something good, you’re creating a lot of safety, but the consequences are actually potentially catastrophic,” said Holmstrom at a seminar in January 2018.
In September 2017, China banned ICO and the transaction of all kinds of digital currencies and later intensified a crackdown on bitcoin mining.