Cryptocurrency: Clever or Crooked?
(THE DAVINCI-CHARLOTTESVILLE) - Cryptocurrency is a form of digital currency. Cryptocurrencies are becoming popular because supporters of cryptocurrency see it as the future of currency. The value of cryptocurrency units fluctuates over time, like stocks, however, cryptocurrencies like Bitcoin were designed to avoid inflation and devaluing in a hope to combat state interference. 6,700 cryptocurrencies are currently traded publicly. Bitcoin is one of the most popular brands of cryptocurrency, and has been running since 2009 — the current value of one Bitcoin is about $60,000.
Cryptocurrency is normally held in a public exchange, such as Coinbase. Coinbase is an application that allows you to buy and sell crypto units, convert them to different cryptocurrencies, or trade them with other users. Crypto units can be stored in and custodied by a public exchange, or kept in a private wallet. However, digital currencies are much easier to self-custody than physical assets are. There has been recent concern surrounding a repeat of the Roosevelt Administration’s seizure of gold in America in 1933, but with cryptocurrencies instead of gold. In 1933, the Roosevelt Administration ordered that no gold be exchanged and placed an embargo on gold trade in banks. The government launched a limited-time buyback program where they purchased gold at a fixed price before a certain date. The government then owned the majority of the gold in the country, and the value of gold was later lowered.
However, cryptocurrency isn’t backed by gold or any physical asset. Its value is based on the amount of energy that is used to mine units and keep the servers that store them running and online. The more crypto units that exist, the more energy they use, and the more valuable the units become. It would be impossible for a government or any administration to seize this energy and electricity.
Cryptocurrencies run on blockchain. Blockchain is a decentralised technology that runs across many computers, making it secure. New information is written into a block, then chained to every other block of information. Blockchain is most commonly implemented as a digital ledger of transactions, as in the case of cryptocurrencies. Information set into a blockchain cannot be altered. Because the value of cryptocurrency units goes up and down — like stocks — no one can control how much your cryptocurrency is worth. Crypto is not controlled by central banks, the way paper currency is, and thus appeals to people who support low regulation and free markets.
Cryptocurrency users have no control over the value of their currency, because it constantly goes up and down. Cryptocurrency units are made by a process called mining, which is nearly impossible to do without the right technology. In regards to Bitcoin, the founder of Uinta Crypto Consulting has said, “As the Bitcoin network grows, it gets more complicated, and more processing power is required. The average consumer used to be able to do this, but now it’s just too expensive. There are too many people who have optimized their equipment and technology to outcompete.” The more crypto there is, the harder it is to get, the more expensive it becomes, and the more energy is needed to sustain the large amounts of digital information. There are concerns over the large amount of energy required to sustain digital currency, as it grows exponentially. Issues of growth and monopoly could be remedied by placing regulations on the amount of cryptocurrency any one person is allowed to own, but some might call that tyrannical or oppressive.
As cryptocurrency rises in popularity and value, like with anything new, it is important to know what it’s all about. Hopefully, this short editorial will grant some insight into the world of cryptocurrencies.