Bitcoin, the original cryptocurrency, has been in the wild since its inception in 2008. Earlier this year, the price of Bitcoin rose to more than $ 60,000, an eight-fold increase in 12 months. After that, it went down to that value in just a few weeks. The prices of other cryptocurrencies like Dogecoin have risen and dropped sharply, often based on Elon Musk’s tweets. Even after their recent fall in price, the total market value of all digital currencies has now exceeded $1.5 trillion, an astonishing amount of material that is not just a computer code.
Bitcoin was made (by an individual or group that remains anonymous to this day) as a means of conducting transactions without the intervention of a trusted third party, such as a central bank or financial institution. Its emergence during the global financial crisis, which undermined trust in banks and the government itself, came to an end in a timely manner. Bitcoin enables transactions using digital identity only, giving users a certain amount of anonymity. This makes Bitcoin a preferred currency for illegal activities, including the latest cyber attacks. It has enabled the black shadow net of illegal online transactions like PayPal to help the rise of eBay by making payments easier.
As it grew in popularity, Bitcoin became harder, less expensive, and more expensive to use. It takes about 10 minutes to verify most transactions using digital currency and transaction costs have been between $30 this year. The varrying value of Bitcoin has also made it an uncontrollable exchange. It’s as if your $ 10 debt can buy you a beer in one day and a bottle of sweet wine in another.
While Bitcoin has failed in its goals, it has become a speculative currency. This is confusing. It has no internal value and is not supported by anything. Bitcoin volunteers will tell you that, like gold, its value comes from its deficit – Bitcoin’s computer algorithm authorizes a fixed cap of 21 million coins (about 19 million have been made so far). But hunger itself cannot be a source of income. Bitcoin investors seem to be relying on a lot of stupid ideas – all you need to profit from investing is to find someone who is willing to buy assets at a very high price.
The collapse of cryptocurrencies is unlikely to weaken the financial systems around the world. Banks mostly sit on the sidelines. Like any guessing bubble, naïve investors who come to the party late are at high risk of losing. The government should definitely warn retail investors that, as in the GameStop Saga, they are putting themselves at risk. The security that allows for Bitcoin price guesses is already regulated, but there is not much the government can do or should do.
Bitcoin is not to blame. The transaction is processed by “miners” using a huge amount of computing power to create Bitcoin. To some extent, the Bitcoin network uses as much energy as all other countries like Argentina and Norway, not to mention the mountain of electronic waste from special equipment used for such fast-burning mining operations.
Whatever the end of Bitcoin, its blockchain technology is really smart and disruptive. Bitcoin has shown how computer-based systems can be used to make payments securely, internally and internationally, without relying on competing financial institutions that charge high fees. For immigrant workers who send money back to their home countries, for example, those funds are a huge burden. Technology that makes payments cheaper, faster and easier to track will benefit consumers and businesses, helping domestic and international trade.
Technology does not exist without risks. Facebook plans to release its cryptocurrency called Diem which aims to make digital payments easier. Unlike Bitcoin, Diem will be fully supported by American stocks or other major currencies, ensuring a stable value. However, as with some of its seemingly high-profile programs, Facebook cannot be trusted to put social welfare above it. The prospect of international corporations someday releasing their undisclosed cryptocurrencies worldwide is of great concern. Such currencies will not threaten the US dollar but could wipe out the finances of small and developed countries.
The variety of Bitcoin technologies also makes many financial products and services available to people at low cost, directly connecting the saviours with the borrowers. These developments and opportunities created by new technologies have encouraged major banks to consider issuing digital currency options. China, Japan and Sweden are already conducting their own digital currency tests.
Ironically, instead of truly spending money on democracy, some of these innovations can increase inequality. Learning about financial inequalities and access to digital can lead to less-than-ideal investors making profits while small amounts of money, glorified by new technologies, are at risk of not fully understanding it. Computer algorithms can do more to discriminate against debt-based discrimination and financial decisions, rather than reduce them. The discovery of digital payments can destroy any remaining privacy in our daily lives.
Cryptocurrencies are the new exciting thing that is going to take over the world that is now becoming more mainstream with everyone investing in the next big crypto coin. But there are many things that people don’t know about these currencies and their history that paint them in a different light.