Lately, crypto-currency has been a huge topic of debate, and rightly so. We have been seeing prices of various “new” currencies on the rise : Bitcoin, Ethereum, Ripple, and so on. There are tons of them, with each being super volatile. While economists all over the world shun this new form of banking, I personally feel that their judgment call is one too soon. Also, I feel that while this may not be the “next big thing” as it exists in its current form, crypto-currency shall be the future of banking. Pretty strong views, huh? Read on to find out why I have such views.
What exactly is crypto-currency?
Crypto-currency is a type of money which you can store/generate electronically. The reason for it being called “crypto” is that each the creation of “tokens” (or units/sub-units of the currency) is regulated by encryption algorithms. Also, transactions involving crypto-currencies again happen following encryption algorithms. In essence, the amount of crypto-currency in liquid form is regulated by mathematical equations. While this may sound outright blasphemy, there is some sense to it. Take a look at the monetary system of the countries of the world, where cash is printed based on certain economic constraints, political issues and a lot more. In fact, crypto-currencies (once they achieve widespread adoption) shall be much more stable and reliable in terms of valuation, owing to money generation happening based on a strict mathematical formula, without involving political issues, etc. I’m sure you must be aware of the fact that the value of money is inversely proportional to the amount of money that is currently in flow. A similar scenario follows for crypto-currencies.
How do I obtain one of these things?
That’s easy. Either you buy them using your currency (USD. GBP, etc.) or you mine them. For those unaware, mining is the act of running the encryption program on your machine to generate hashes. Hashes add up to give you crypto-currency tokens. However, mining isn’t profitable at any given time. It gives you profit only if the crypto-currency rises in value later on. If you have free electricity though, you would be able to obtain a fair chunk of profit. Know that the encryption algorithm weighs you relative to other miners out there and so, if others are using more capable hardware to mine crypto-currency, then you shall be able to mine much lesser than if others were using hardware similar to you. This is one of the reasons mining is not viable these days. You have people who have dedicated rooms of server grade computers, fixed with the highest power GPUs, working to mine crypto-currencies. A normal person won’t be able to mine much because of that.
What are the advantages of crypto-currency?
For one, all your transactions stay anonymized and encrypted, allowing for privacy while making transactions. This can help in a lot of ways, like reducing the amount of data others have about your buying choices, etc. Another big example of this technology is that it is based on something called as “Blockchain”. Blockchain is a big thing by itself, with a lot of applications in real life. One of the amazing things about crypto-currency is that all the money transfer links are available for everyone to see. So, anyone can see which account paid which other account how much money. Note that this doesn’t allow anyone to know who the person operating the account it, so long as there is no transaction made from the crypto-currency account to a regular bank account. Thus, if implemented at all levels, this technology has the promise to remove corruption as well.
Why is everyone so critical of this technology then?
A multitude of reasons exist for this one. Economists are critical because they don’t understand shit about this technology. Politicians are shit because they know that this could rid their ill-gotten gains and prevent future corruption (also, they don’t understand the math behind this tech as well). Criminals and propagandists dislike this technology because cash is so much more convenient for laundering, crimes, smuggling, etc. and once crypto-currencies shift the entire system online and visible to everyone, it will hinder their criminal activities. And journalists want click-bait articles, so they play on with the confusion and dislike of the technology.
So, what will happen eventually?
One thing that is constant in this world is that you can try as much as you want to but cannot stop the advent of newer technology into your lives. And with that, I stay hopeful that soon there shall be a future of crypto-currency, leading to a much more decentralized, privacy-centric, and transparent financial system worldwide.