Most of the people have now started talking about cryptocurrencies like Bitcoin, Etherium, Doge Coin, Shibu Coin etc. Some people say that cryptocurrency is a scam and some say it is the future. In this article we’ll weigh arguments from both the sides.
What is a cryptocurrency?
A Cryptocurrency is a computer generated unique digital certificate that has no value of any kind but has a serial number to uniquely identify a cryptocurrency certificate. There is a global ecosystem that verifies every cryptocurrency transaction and people who participate in that ecosystem receive rewards as new coins. A cryptocurrency buyer pays the seller in fiat currency and receives that unique digital certificate number in return.
Bitcoin is the highest priced cryptocurrency as of today. There are 4600+ different such currencies exist as of June 17, 2021. Anyone with a computer and some knowledge can copy existing cryptocurrency code and create one in a matter of few hours. However, to make it successful tons of marketing is required and a community is needed that can support the cryptocurrency.
Cryptocurrency is the future argument:
People who say that “cryptocurrency is the future” base their argument on the following points:
- If people are willing to pay, anything can have a price.
- Bitcoin has a limited supply of 20 million coins that makes it a scarce resource.
- Cryptocurrency has no government interference and acceptable across the globe. It is immune to the stability of any government.
- This can simplify global payment transfers.
- More and more organizations have started investing in cryptocurrencies. There are 7 billion people and if everyone starts transacting/accepting cryptocurrencies, its value will sky rocket.
- Support from illegal activities – Since, cryptocurrency transactions are autonomous, world criminal activities, terrorism, extortion, corruption, etc are flourishing through cryptocurrency payments. This will push cryptocurrency demand higher as more and more illegal activities will keep funding through these currencies.
- No downward pressure – Investors can short a typical currency but there are no financial products that can put downward pressure on a cryptocurrency. This will keep pushing cryptocurrency prices higher.
Cryptocurrency is a scam and has no future argument:
People who say cryptocurrencies are a scam give the following arguments:
- Unlimited supply – Only Bitcoin has a limited supply but all other cryptocurrencies have unlimited supply that means cryptocurrency communities can generate any number of digital certificates. This is like creating the certificates out-of-thin-air and selling them for a price that people can pay. One cryptocurrency coin can have up to 10-18denominations. One dollar has 100 cents but one Doge coin or Bitcoin can have 10-18 sub certificates. This makes any cryptocurrency supply unlimited.
- Unregulated exchanges – Whole cryptocurrency industry is unregulated. None of the countries have regulated cryptocurrency exchanges. Most governments have no policies, auditing, rules, oversight, and checks/balances to stop exchange fraud. This means exchange owners can manipulate prices, steal money from account holders, and do anything they want to promote what is in their best interest. So, in an exchange, if two exchange related accounts, start selling and buying between them, they can inflate any cryptocurrency price. Exchange can say that someone hacked into the system and stole account holders’ cryptocurrencies.
- No intrinsic value – Digital certificates have no intrinsic value. Computer algorithm can create as many certificates as possible. Their prices can go up or down without any reason because there is nothing to hold that price from going up or down.
- Government crackdown – Sooner or later governments will start cracking down on cryptocurrencies. This will slow down its adoption and may destroy them for good.
- Ponzi scheme – A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. This is exactly what is happening with cryptocurrencies. Since cryptocurrency supply has no limits, these certificates keep on growing and someday will outnumber the buyers. That’ll be the day when it’ll crash.
Conclusion:
Cryptocurrency can go either way depending on what people are willing to pay. Cryptocurrencies have no intrinsic value like a stock, fiat money, or painting. A cryptocurrency will keep on having a price as long as there are people to pay that price.