A cryptocurrency, or “crypto” in short, is a digital currency that serves as a form of online payment for goods or services. To secure transactions, it uses an online ledger built on top of a strong cryptography, hence the name, called blockchain.
You may want to think of crypto as you would casino chips or arcade tickets. Meaning that, each place or company can issue their own form of cryptocurrencies. Currently, there are 15,000 different cryptos traded publicly, with bitcoin as the most popular one. And in order to get them, you need to exchange it with fiat currency (money).
Why some think Cryptocurrency is a hit
Supporters of crypto see the alternative currency as the future. Early believers of cryptocurrencies mostly consist of people who distaste the government-run fiat currency. According to them, centralized banks inherently corrupts people’s money by intervening in its value (i.e. inflation). Even more so, people who control centralized money supply are often the ones benefiting the most out of any policy. For example, one of the immediate consequences of inflation is that people will pay more taxes, hence more money goes to the government.
Cryptocurrency offers a solution to this. The most popular crypto at this time, bitcoin, has a fixed money supply, therefore there is simply not a chance for inflation. Furthermore, blockchain is a decentralized system which means no one, not even the government, could intervene with the ledger or the token value.
Crypto believers essentially predict that eventually all payments around the world would be done digitally. And bitcoin having a fixed supply and decentralized system, will only make it the superior currency of the future. Despite many criticisms pointed against crypto, it certainly has gained a lot of people’s attention, investors and economists alike, over the last few years.
Read More: The Bright Future of Bitcoin
Why some believe Cryptocurrency is a total miss
Despite all the potentials it possesses, crypto lacks one thing which is stability. Since people need to exchange fiat money for these tokens, a stable value exchange is essential so merchants can determine fair prices for their goods and services. Unfortunately, cryptocurrency is notorious for its unstable exchange value. For example, at one time bitcoin traded at $20,000 in December 2017, but the value crashed to $3,200 only a year later. Thus, many consultants have advised investors against dropping money into the scheme.
Secondly, there has been concern raised against crypto in regards to environmental issues. Operating in a decentralized system means that crypto’s ledger relies on its community members to verify every transaction. Since everything needs everyone’s approval, this makes crypto’s operational expense very inefficient and costly. The amount of energy consumed just to confirm a single transaction has been criticized by many as too environmentally damaging. However, the counter-arguments came by saying that using crypto actually helps fight against climate change.
It’s a given that everytime a new technology appears, people’s first instinct will be to doubt or even challenge it. Anyhow, among limitless new ideas being presented everyday, only few of them will actually work and be widely accepted. As the discussion around cryptocurrency becomes more sophisticated, hopefully there will be a time where a middle-ground, or an altogether new solution, can be obtained for our monetary issues and concerns.