By Bobby Liberatos ’24
Cryptocurrency has taken the world by storm in the past decade. El Salvador has even recognized Bitcoin (the most popular crypto) as legal tender and tech giants such as Paypal have started accepting crypto as a form of payment.
Cryptocurrency is based on blockchain which documents the transactions and movement of all cryptos. By far, the most popular and famous cryptocurrency is Bitcoin. 270,00 Bitcoin transactions take place annually while 106 million people hold Bitcoin. Bitcoin has become a hot speculative investment. It has made wild moves as a result. In April 2020, its value was roughly 6700 dollars, but by April 2021, it had skyrocketed to over 60000 dollars. It has a lot of value since but is still worth about 43000 dollars. El Salvador adopted Bitcoin in order to allow people who lacked access to the traditional banking system another way into the financial system. However, this move may fuel drug money and the people it is aimed to help may not have internet access to put it in use.
Cryptocurrency is like the Wild West of the economy right now. The government has very little influence over it. Your transactions are basically untraceable and it cannot be seized from you unlike other assets. This has made it attractive to those who are concerned that the government has too much power over banks and other traditional financial institutions. Some may have worries that crypto is vulnerable to hacking and the stealing of your digital currency. However, this is an invalid concern since the blockchain system on which cryptocurrency is based is virtually unhackable. Yet, a person’s digital wallet itself can be hacked and therefore you have to appropriately safeguard your personal “key” as it is called which enables you to make transactions.
Many countries have banned crypto currencies. China banned it in 2021 because the government had no control over it and wanted to push out its own form of crypto.
In the long run, we can expect crypto to only grow in power and influence but it is valid to be wary of the government pushing more regulations on crypto. This could dampen the growth of the asset. Nevertheless, crypto might be one of the defining innovations of the 21st century.