Cryptocurrency is a form of digital currency existing completely in the virtual world. This means that, unlike physical forms of money, cryptocurrency cannot be put into a tangible form that can be exchanged in the material world. It also cannot be duplicated.
Some consider cryptocurrency to be a legitimate form of money, while others consider it a worthless–and, potentially, dangerous– scam. This article will cover the history of cryptocurrency, its uses, and debate if it has the potential to be used more for good or bad.
Cryptocurrency (also known as “crypto”) was invented in 1990 by the company DigiCash under the name eCash.In the United States, eCash (short for “Electronic Cash”) was only implemented in the Mark Twain bank in Saint Louis, Missouri. Since then, there have been other iterations of crypto such as Hashcash, B-Money, Bit Gold, and Flooz.
The most popular and widely-known version of crypto, dubbed Bitcoin (also known as “BTC”), was invented in 2008 by Satoshi Nakamoto.
Nakamoto himself is a mystery. He left the Bitcoin project in April 2011 and seemingly disappeared off the face of the earth. Even though a 2014 Newsweek Magazine article titled The Face Behind Bitcoin said his real name was Dorian Nakamoto, this may have been disproven by another article published by Forbes Magazine.
The Forbes article, titled Who Is Satoshi Nakamoto? Featured an email allegedly sent by Nakamoto stating, “I am not Dorian Nakamoto.” His true identity is still debated to this day, with one theory even suggesting that Nakomoto is a pseudonym for a group of people.
In 2008, Nakomoto also published the Bitcoin white paper, which revealed more details about Bitcoin’s function and impact it would have on society. The paper describes Bitcoin as, “[...] a [...] electronic cash system that’s fully peer-to-peer, with no trusted third party.” This system ”[...] would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution.”
Unlike crypto’s previous iterations, Bitcoin is decentralized, meaning it is not controlled by a single authority, whether that be a person, institution, or government. Instead it is controlled by multiple authorities. At the heart of Bitcoin, as well as cryptocurrency as a whole, is something called a blockchain.
A blockchain is a database that stores cryptocurrency transactions. According to the article, History of Cryptocurrency published on May 31, 2022, it “[...] is often called a [‘] triple-entry [‘] bookkeeping system [...] any Bitcoin transaction can be located on that digital record.”
There has been some controversy concerning Bitcoin. First, contrary to popular belief, its transactions are not fully anonymous. While it is true that the transactions can’t be traced to a specific person or address, they can still be traced using certain methods. According to the article, Is Bitcoin Anonymous? A Complete Beginner’s Guide published on November 18, 2015, “Bitcoin addresses can be linked to real identities if these real identities are used in combination with the Bitcoin addresses in some way.”
Another controversy associated with cryptocurrency is its lack of restrictions. According to the article, The cryptocurrency controversy published on May 2, 2022, “It [cryptocurrency] has been associated with illegal activity and black-market deals.”
Multiple governments “[...] see the cryptocurrency space as a threat to government stability because of the lack of control over the currency. As a result, several restrictions have been leveled against the coins and their usage.”
These restrictions include banning cryptocurrency in several countries, which includes Algeria and Bolivia. Another restriction is limiting its usage.
A fairly recent controversy regarding cryptocurrency is its association with Non-Fungible Tokens (also known as “NFT”). NFTs are a type of cryptocurrency that, unlike Bitcoin, cannot be traded for something else. Once someone buys an NFT, it’s theirs for good and it cannot be copied. According to the 2022 article, 9 Reasons Why NFTs Are Bad For Artists), “[...] they explicitly identify the owner of the original asset.”
NFTs are considered to be bad for the environment. As the article, Why NFTs are bad: the short version published on September 3, 2021, states, “[...] they [NFTs] rely on cryptocurrencies that cause huge amounts of carbon emissions.”
NFTs are also thought to be bad for artists. Once someone buys a piece of art, they are considered the “owners” of that art. But, not everyone has to buy a piece of NFT art to have it; given that it’s readily accessible to the public, one can just take a screenshot of it or download it as an image. This, combined with the expensive nature of NFTs and cryptocurrency in general, makes them a very hard sell to potential investors.
Despite its drawbacks, cryptocurrency has some positives to it. According to the article, What Is Cryptocurrency And How Does It Work? Cryptocurrency can be “[...] a hedge against inflation.” Hedging is a risk management strategy that protects people’s finances against possible inflation. It does this by retaining or increasing the saved money’s current worth even if inflation occurs.
Ensuring good hedging with cryptocurrency will depend on the type of cryptocurrency that is used. The article, Is Crypto A Hedge Against Inflation? What You Need To Know states that currencies like Bitcoin are not good against inflation because their value changes rapidly. However, the article also states that, of all the cryptocurrencies to hedge in, Bitcoin is the safest. This is because it is “[...] a larger, long-established type of crypto [...]”.
Another benefit to cryptocurrency is that it makes purchasing items easier and faster. The article, What are the benefits of cryptocurrency? States that this is because “Cryptocurrencies don’t use [a] middleman [or, an intermediary between business transactions].”
A final benefit to cryptocurrency is enabling the poor to establish credit. The article states that “[...] more people have access to the internet than to banks or other currency exchange systems [...] crypto could be the key to eradicating global poverty and corruption [...]”.
In conclusion, it seems that, while it may be good for faster purchases, enable the poor to establish credit, and provide a possible hedge against inflation, cryptocurrency seems to offer more potential risks than rewards. If one is to invest in cryptocurrency, they should be careful not to bet too much on one type.
Edited By: Mary May
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