Is Cryptocurrency Good for the World?
Recently rising in popularity, cryptocurrency may be one of the most intriguing “assets” in the world. Unlike many other investments, these assets have no real underlying value and are vastly different from traditional currencies, such as the euro and US dollar, which are backed by powerful central banks. These relatively new instruments have opened up an unknown set of options for the market.
While on one hand there has been much criticism surrounding these assets with some even calling for the end of cryptocurrencies due to their use to facilitate illegal transactions like buying drugs and other restricted substances as well as money laundering. However, despite all the negatives, cryptocurrencies have fostered a revolutionary technology in blockchain which has the potential of revolutionizing how we record and maintain information, and this should be encouraged.
Despite what skeptics may say, cryptocurrencies are good for the market due to their role in the cross-currency exchange, transfer and transaction facilitation. These currencies may even be the future of the currency market for its unique, non-regulated role in the global asset exchange.
For one thing, cryptocurrencies are not subject to the complicated exchange procedures and rules that all world currencies are subject to. The independence from these rules allows them to be free of manipulation by the various central banks that regulate the currency markets. The lack of government controls on its worth allows people to use cryptocurrencies as a store of value without worrying about their money being devalued or defaced by their own government. That’s not to say that these assets are not subject to spikes and falls in value, but it does mean that these tools are relatively unaffected by a government’s (mis)management of its economy, which makes them especially useful in the developing world, where governments are often corrupt and known to have failed economic policies.
It also means they are not subject to the wide range of fees associated with currency exchange and administration, meaning one can send cryptocurrencies across the globe without any fees. They can also be liquidated and exchanged into traditional currency relatively easy.
Cryptocurrency also provides a form of social connectivity in the world. Despite the continuous rise of access to technology across the world, it is still difficult to make non-local purchases. Given its portability, instant transfer, transaction charges, Cryptocurrency solves this problem. These transactions can be conducted in a highly secure, private and anonymous manner. The technology underpinning cryptocurrencies also allow for safeguards around the identity of the users as opposed to the traditional means of value exchange that expose vast amounts of user information to non-secure platforms.
The Bad (But Fixable)
Despite the aforementioned strengths of cryptocurrencies, it does have some shortcomings. Most importantly, in its current state, many people have a hard time trusting these tools. And for good reason. There are too many examples of cryptocurrencies being uncovered as major scams or being hacked.
In April 2018, Pincoin and Ifan owners closed their offices and absconded with $600 million from investors. In late January 2018, hackers broke into Coincheck and stole $400 million from the company. The list of documented scams and hacks of these cryptocurrency companies goes on and on. Another problem with security is hacking. There have been millions of dollars poured into research on creating comprehensive and safe systems for online currency that will make this process safer. Researchers from across the globe are already focusing on building reliable systems that users can trust. This trust issue can be partly solved by staying with established cryptocurrencies such as Bitcoin and Ethereum that have strong security infrastructure.
Another problem with cryptocurrencies is their volatility. In just a 4-day stretch in September, Bitcoin, arguably the most popular cryptocurrency, fell by 16%, an over $1000 difference. In order to gain mainstream acceptance, cryptocurrencies become more stable.
At this point, not many entities accept cryptocurrencies as a medium of exchange. This is partly due to negative perception around these currencies as tools for facilitating all kinds of illegal transactions be they purchase of drugs, prostitution, poaching, bribery etc. By embracing regulation and working with regulators the large crypto exchanges can help to demystify and focus the regulators on legitimate uses.
The economic opportunities of cryptocurrencies make them poised for the future given their role as a universal currency. Although cryptocurrencies offer this wide range of economic opportunities, moderators of cryptocurrencies must take the necessary steps in cutting down on hacks and scams concerning their community in order to gain global popularity. The universal asset exchange will encourage cryptocurrencies to become the future of the monetary exchange, as people will find it easier, cheaper, and more efficient to trade with partners across geographic barriers in a one seamlessly inter-connected world.
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