Cryptocurrency supporters usually state that this technology will influence the world similar to the effects of the internet, however, one of the revolution’s most successful entrepreneurs has objected to this opinion.
Sabeer Bhatia, founder of now-shuttered email service Hotmail talking with regional media outlet Arabian Business noted that cryptocurrencies operate on a business model created on a scam.
“The underlying business model that I have looked at is fraud. Cryptocurrencies are nothing more than white papers, a hope in the way the world will be,” he said, joining critics from different bitcoin bears such as Warren Buffett and Jamie Dimon.
In the late 1990s, Bhatia who sold Hotmail to Microsoft for approximately $400 million noted that he is confident that the dotcom bubble is a generous comparison for the cryptocurrency outburst given that disreputable firms such as Pets.com were early attempts at what is generally known to be a genuine business model.
“The likes of Pets.com and the Books.com were at least versions of e-commerce platforms that are only growing today,” he said. “There [were] missteps back then but, guess what, we’re doing everything online today. They were right… but they were too early and didn’t have the staying power like an Amazon. Those failures tried to pick a vertical and wanted to be the solution for that segment. [There’s] nothing wrong with that.”
He categorically removed IOTA whose market cap hit close to $15 billion in December 2017 but has since dropped to $3.5 billion mirroring the general cryptocurrency market. Even though the project has signed a series of collaborations with high-profile firms such as Volkswagen and Bosch, Bhatia believes the token’s value was “entirely speculative.”
“There is a token called IOTA, which is based on the Internet-of-Things. But they haven’t sold a single device to anyone. The whole idea is: ‘In the future, one IoT device will be able to talk to another IoT device and settle any financial transaction between them using blockchain. That’s the idea. And although it’s never been implemented, the idea is worth $15bn? Really? The values are entirely speculative.”
He noted that even though blockchain technology can be beneficial for cross-border settlement, the majority of investors will possibly lose money investing in an asset class that is “too good to be true” and according to him does not offer value for society.
“The most successful companies of the last 10-15 years have been networks,” he concluded. “Facebook, WhatsApp, Instagram, and even Uber is a kind of network. It seems that cryptocurrencies are trying to grow a network and people buy tokens and people participate in the growth of the network. But what is the network really doing? The fundamental question of creating value for society is one they carefully dodge.”