There’s been a lot of hype recently about Bitcoin and other types of cryptocurrency. So, are they really the future of money, or just a lot of digital hype?
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Since 2017, when its value skyrocketed and turned a bunch lucky folks into overnight millionaires, there’s been a lot of buzz about Bitcoin and other types of cryptocurrencies. Millions of people around the world own some form of cryptocurrency, and entire new industries have sprung up around them. Some believers think that cryptocurrencies could even replace traditional monetary systems. But a good number of skeptics say that this new type of digital cash is just a short-term fad that won’t last long.
What is Bitcoin?
Bitcoin was the first cryptocurrency, introduced by an anonymous programmer(s) in 2009 (under the alias Satoshi Nakamoto). Like the other cryptocurrencies that followed it, Bitcoin is a peer-to-peer digital cash network that was created to allow users to make financial transactions without the need for a bank or other trusted third party. Transactions are validated autonomously by computers on the network that compete to solve complex math problems. Cryptocurrencies are not tied to any national government or currency, and are therefore largely unregulated. Also, their value is extremely volatile and unpredictable, based entirely on speculation.
What is the blockchain?
Bitcoin and other cryptocurrencies operate on open-source software that facilitates transactions between users and ensures the transactions are valid. A group of transactions is known as a block. When that block is validated by other computers on the network, it gets added to a ongoing list of transactions called the chain. All users in the network can see this growing list of transactions (which is called a ledger), although the identify of the buyer and seller and what they’re actually exchanging remains anonymous.
Why are so many people so skeptical about cryptocurrencies?
Many traditional economists argue that Bitcoin and other cryptocurrencies are just bubbles waiting to pop. They note that their value is based on nothing but speculation – the confidence people have in them at any given moment for whatever reason. And unlike dollars and other traditional currencies, they are not backed by any government, so their value doesn’t come with any guarantee. Skeptics also note that because the value of cryptocurrencies is so erratic and so few businesses accept them, that they’ve largely failed to be functional alternative forms of payment.
SOURCES AND ADDITIONAL RESOURCES
Bitcoin: A Peer-to-Peer Electronic Cash System, Jan. 2009
NY Times: What is Bitcoin, and How Does it Work?, Oct. 2017
Coindesk: Bitcoin Price, accessed June 2018
NY Times: Bubble, Bubble, Fraud and Trouble, Jan. 2018
MIT Technology Review: Bitcoin would be a calamity, not an economy, April 2018
Business Insider: A major bitcoin conference is no longer accepting bitcoin payments because the fees and lag have gotten so bad, Jan. 2018
The Economist: Venezuela’s currency plumbs unknown depths, Jan. 2018
Business Insider: Venezuela’s new 100,000-bolivar note is worth less than $2.50 in US dollars, Nov. 2017
The Guardian: Meet Erik Finman, the teenage bitcoin millionaire, June 2018
Bitcoin.com: Survey Says 8% of the American Population Now Own Cryptocurrency, March 2018
Foreign Policy Journal: Can Bitcoin Save Venezuela?, Feb. 2018
Wired: Where Could Bitcoin Succeed as a Currency? In a Failed State, March 2018
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