Evolving the State of Cryptocurrency
Dubious Existence and Value
Money exists in an abstraction. In the simplest of sense, money equivalates to the general economic performance of a country. There are multiple different factors involved, but it doesn’t change the fact that every dollar you have exists as an abstract representation. If everyone would try and pull their money from the bank at the same time, they wouldn’t be able to pull it off because banks wouldn’t physically have that money. It’s also the case with multi-millionaires and billionaires, their worth is also determined by things like the worth of assets, different kinds of capital, speculation, etc. It is a bit of a mess how we determine monetary value, but at least the abstract can be linked to something tangible: the flow of goods, ownership of debt, companies with specific locations and operations, and the like. I’m a bit unsure about the way we value cryptocurrency, however.
I’m going to present what cryptos are supposed to fundamentally be: a finite amount of data that can be exchanged for goods and services. Code on a computer that supposedly has a monetary value and can be exchanged for something else. Bitcoin, dogecoin, and other cryptocurrencies are not so different from the fake, premium currency you use in video games to purchase in-game items. It’s just code! Of course, there is a lot of discussion about how money is ‘fake’ anyway since it is not directly equated to precious metals. Fiat money/floating currency does not have any value other than what is decided by groups like the government.
How do cryptocurrencies determine their value? There is always supposed to be a finite amount of currency. This is to assure that the currency will have its value. Cryptocurrency follows the same logic, and the technology assures that there will never be additional kinds of the same crypto once the amount has been decided on. So, are there any other determinant factors on how cryptocurrencies are valued at? What gives cryptos their value is blockchain technology itself. The technology is pretty expensive and is considered an asset that has value. The assumed value and the difficulty of acquiring the technology assure that cryptos are a worthwhile investment and that they will be valuable. But… that’s not all.
Cryptocurrencies have limited regulation, if at all. While there have been efforts in the past few years to regulate cryptos, the regulation is limited, new, and at least in the United States, still not wholly implemented and ingrained. Some countries have declared cryptos taxable assets, some countries have banned or heavily limited cryptos, or taxed the action of mining cryptos in of itself. The United States still hasn’t fully defined cryptocurrency and due to that treats cryptos as currency. Which is a problem.
Alright, so what? What does this mean? It means that cryptocurrency will continue being an unstable investment so long as it remains unregulated. It also makes for an unreliable currency. The top 3 cryptocurrencies have been the most bought, as well as the first implemented. Prices fluctuate heavily between other cryptos and many don’t remain valuable for long. The most successful cryptocurrencies are also early adopters or the ones that are favored for arbitrary reasons. Bitcoin IS the first crypto after all, and the most valuable. The other thing is that acquiring cryptos is hard. You need to be able to pay the money for the crypto, which might be ridiculously high for most folk. You can also mine cryptocurrency, which usually acquires a lot of investment to ‘find’ the cryptocurrency, or decrypt and acquire access to the coin. There are ways to circumnavigate some of the costs, but the returns are lower, such as acquiring a single crypto percentage. While a percentage of one bitcoin is still ‘good money’, how are you going to cash it in, especially between various individuals that may have different goals? Also, your crypto wallet might be hacked, and you will lose that digital currency forever, and no bank is going to give you any amount back or even remotely attempt to resolve the problem. In short, as an investment, it is supremely risky and not worth it for most folks.
Interesting Technology, Untapped Potential
Don’t get me wrong, blockchain technology and the idea of digital currency are both incredibly novel. Having a self-recording program that recognizes transactions made is nothing short of an accounting miracle. I wonder if that kind of technology can be implemented in other formats so that way stores have an easier time bookkeeping, making businesses a bit simpler to manage. As for digital currencies in general, I don’t think there is anything inherently bad about them. Having a digital version of the dollar or being able to be paid in a format that can be readily be exchanged for other currencies should be positive. A lot of possibilities lie in cryptos: being able to use cryptos as alternate payment methods or bonuses for individuals, using cryptos to make a worldwide uniform currency without needing to go through the trouble of money exchange, etc. In fact, there are some successes in implementing regulated cryptocurrencies and using cryptos as a valued method for distributing international aid. But that isn’t the current state of cryptos.
One of the big issues I see with cryptos is that they aren’t really good for being used as actual currency. For something to be used as money, it has to be accessible, valuable yet finite, and scarce enough that can be spent for goods and services easily. What’s the use of having a singular coin that is worth thousands upon thousands of dollars? Common banknotes don’t usually go past 100 dollars for a reason, and personally, it wasn’t until I was in Chicago that I saw a 100 dollar note actually used. Their current state is that of an asset you could potentially exchange for money, and most attempt to qualify cryptocurrency as a ‘digital asset’. While there is definitely a use for that, it defeats the purpose of having data used as currency.
Also, while blockchain technology is awesome, you can still use things like pseudonyms and not be able to fully track all the data for bookkeeping purposes. Essentially you are fooling the system to increase the security of your identity. Blockchain technology protects against fraud, but you can remain somewhat unknown and hard to track using the technology. On the other hand, some cryptos may have their own requirements for purposes that one may not meet, such as having specific regional banks or identification. So, acquiring cryptos in say, colonized areas, might be more difficult.
Blockchain technology itself is expensive, but as the technology grows more prevalent and accessible, the value of cryptos will generally be lower. That’s why various experts note that there might be a similar economic bubble phenomenon with cryptocurrency that will pop, similar to the .com bubble or the housing bubble. To what extent it will happen or when it will happen, is unknown. Predicting stuff with accuracy is hard, and the cryptocurrency party is bound to end sometime. It is cyclical with this kind of stuff, and while blockchain technology will probably retain a good amount of value, how much of that value will be retained is a mystery.
More Politics!
My fears come from what cryptocurrency used to be. In the process of trying to write this, I realized that cryptocurrency was steadily evolving from what I assumed was a libertarian landscape. I was surprised at the international efforts at regulating cryptos. I can’t say it’s a uniform effort, but countries have recognized that leaving cryptos unregulated is a terrible idea. And it is concerning that the United States is not taking precautions on time. Cryptocurrency in the United States will most likely fight for less regulation or repeal the little regulation cryptos have at the moment. While cryptocurrency has traits that make it easier to manage than regular currency, without regulation, it can be set up for numerous problems, false promises, scams, and domination of the most successful cryptocurrencies.
There are reports of companies paying employees with their self-made cryptocurrencies. These cryptos can only be used for goods provided by the company itself. That is straight out of a dystopian novel and it harkens to practices companies used to implement, where they would pay employees in their own currency, sell the things the employee needed to live, and offer them the space they would live for them to continue working for the company, basically trapping the employee into a kind of slavery. That is something that also shouldn’t come to pass or become widespread. I shudder at the prospects of continuously allowing things that will clearly only benefit a minority.
This is the far cry of how we should be looking at the future of cryptos. Widespread use of them used to serve as alternate payment methods or as bonuses that the government can give in place of regular currency. I know there are attempts of doing this in places such as Australia, having a government-backed cryptocurrency, and that seems like a promising outlet in order to boost economies and manage inequality. Without adequate care and management, it could backfire, but we need to think of ways of using cryptocurrency to its fullest potential. Sadly, I don’t have the best plan for it, but there’s got to be a way cryptocurrency can alleviate debt, inequality, and be a general boon for most people. Maybe UBI can be implemented via cryptocurrency? Just a thought. But as of now, The United States still has vestiges of the libertarian environment cryptocurrency that existed a few years back. There are a lot of so-called ‘cryptocurrency investors’ that want to make millions effortlessly and create spaces where they rule and do whatever they want while taking advantage of underpaid workers and programmers and not doing much for the local economy.
Final Thoughts
We need to make the best out of this new technology. There is no doubt a lot of good that could come out of blockchain technology and cryptos. This could also blow up in our faces. I originally came in expecting cryptocurrency to remain an unregulated hellscape, but I was pleasantly surprised. This still doesn’t mean that I trust the technology as a sound investment. I also fear what is happening with blockchain and NFTs, which is a whole mess that merits investigating and critiquing. I can also be wrong; even if blockchain technology becomes very cheap, the bubble might not pop, or if it does, it won’t affect the value that much. But my main aspiration is to see widespread use of cryptos, complementing our normal currency and not allowing grifters free reign to do what they want with the technology without repercussions. I hope to see a bright future for this technology.
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