Peter Schiff Attacks ‘Nonsensical’ Bitcoin Consensus Algorithm

Peter Schiff is widely known as Bitcoin’s most prominent skeptic. The gold bug has been on the offensive several times in 2020, bashing the leading cryptocurrency again amid a rally. Schiff took to Twitter to bash Bitcoin, explaining that the asset’s underpinning technology itself is nonsense.

Miners Getting Rewards for Dirt

Schiff dug at blockchain technology, highlighting that the concept’s primary consensus mechanism was useless. The investor appeared to be particularly angry at the proof-of-work (PoW) mechanism, explaining that it focused on the wrong metric while rewarding miners. Not one to be succinct in his criticism, Schiff said:

“The idea that # Bitcoin’s value comes from the past work required to validated the information encoded on the block chain is nonsense. If I work hard to dig a hole and then fill it back up with dirt, what value does my labor create? Effort that produces no value is worthless,”

Like everything he said, Schiff’s tweet immediately drew reactions. Bruce Fenton, the managing director at Chainstone Labs, explained that the investor had been missing something else.

1/ That’s correct. The value of energy burned alone does not give Bitcoin value. This is why other proof of work coins are not as valuable as Bitcoin and many have failed entirely.

Proof of work is only part of the puzzle piece: it’s burned energy that shows skin in the game

— Bruce Fenton (@brucefenton) November 21, 2020

As Fenton said, Bitcoin would have failed if its entire value was based on just PoW – much like other assets running on the mechanism. However, the leading cryptocurrency has been successful because it derives value from more than just its consensus mechanism.  

Another Twitter user replied, claiming that miners on the Bitcoin network provide real value based on their transaction confirmation tasks. So, they deserve to get rewards.

Just an Angry Trader Griping 

Schiff’s criticism of Bitcoin isn’t new. The investor and trader is known as one of Bitcoin’s top detractors, joining people like Nouriel Roubini. Just last month, he attacked the digital asset, calling it the biggest bubble he had ever seen. As he explained, the asset should account for the most gigantic financial bubble based on the conviction level that traders have.

“Bitcoin hodlers are more confident they’re right and sure they can’t lose than were dotcom or house buyers during those bubbles,” the investor highlighted.

The tweet came as Bitcoin rose to historic levels against gold. At the time, data from CoinGecko showed that the BTC/XAU trading pair had moved to 7 ounces against 1 BTC mark on October 25

One of Bitcoin’s many advantages against gold has been its seeming dissociation from the dollar. Gold remains linked with the greenback, and with the coronavirus forcing the global reserve currency into a downward spiral, it has dragged gold down with it.

Bitcoin last broke the seven-ounce mark in September 2019. PlanB, a quant analyst, called the latest development a “significant” one, while data tracker Ecoinometrics added that Bitcoin was poised to capture a considerable portion of gold’s market cap.

The leading cryptocurrency looks ready to end another year delivering much better returns than gold. Perhaps Schiff is just angry at that.