Cryptocurrency and its Myths
“Nothing is perfect in this world; everything has its pros and cons…” -Nivendita Sharma
This generation, where anything digital and automated is smart, leaves behind loopholes often neglected and forgotten. As we move forward in using different kinds of technology, we tend to visualize the end of the tunnel and lose sight of why we are doing it, considering the present situation. This goes with the digitized version of gold bars, a non-physical asset we now call cryptocurrencies.
Cryptocurrencies are computer-generated virtual currencies secured with cryptographic technology, which makes them protected against counterfeit and double-spending. It uses blockchain technology enforced by a network of computers and not issued by a country’s authority, rendering the product immune to government interventions and open to private engagements.
Given its definition, this technology is indeed a one-of-a-kind feat and even revolutionizes how the world uses money. But, with all their promises, cryptocurrencies remain questionable and vulnerable to various abuse and implications. Let us take a deeper look into the various myths associated with it.
Myth #1 – Cryptocurrency is real money and can be in replacement of traditional notes
Initially, cryptocurrencies were created around 2009 to replace traditional banknotes, debit cards, credit cards, and cheques as modes of payment. Termed as the cryptocurrency grandfather, Bitcoin envisioned an electronic payment transaction pathway to willing individuals without the need of third-party entities such as banks, government agencies, and the like.
There are other forms of e-money now revolving around the globe, but the major difference is the reference of money. In e-money platforms, actual cash is still referenced to actual legal tender stored in banks and other money storage facilities. Bitcoins and the rest are referenced only in a virtual entity produced by the computers.
While the concept behind this remained true, the reality is, these computer-generated currencies can only be produced in a limited quantity. For example, in Bitcoin, the computer network could only generate a maximum of 21 Million units, which would ultimately make it impossible to supply the global market requirements completely.
Other digital companies followed suit upon the initial successes of Bitcoins, where stocks skyrocketed in the trading industry. At present, if you google cryptocurrencies, you will be amazed at how plenty there are in the market, each trying to take stocks shares and gain popularity to increase their monetary value in the virtual platform.
The fact is, with the law of supply and demand in place, with the limited supply of coins, it now becomes an investment platform, away from its original concept upon creation. This leads us to the second commonly known myth.
Myth # 2 – Cryptocurrency is good investment material
Now we go to gold - the physically present, hard evidence and proof of all the hard money circling the world. The amount of gold and gold reserves usually establish a country in its position in the international central bank. Thus, hard-core investors and businessmen are eyeing any potential to gain shares in this rock-solid element.
Though gold is still being mined in many countries around the globe, the deposits have slowly been depleted. This creates an opportunity for individuals to invest their money in the stock market and let it rise over time, following the concept of low supply and high demand. Since this is the basis of governments in establishing their position globally, demand for gold continues to rise year on year.
With the concept behind cryptocurrencies, now like gold products, at a very limited quantity and increasing popularity among individuals, these virtual products are becoming the digital representation of gold. Added to the fact that these currencies are secured and that these are produced by the supervision of computers and not the government, trading these assets becomes limitless.
In the United Kingdom, this 2021, Binance is currently banned under its regulation. We are seeing a shift as the local government tries to intervene and set standards, preventing probable misuse of the money and investments alongside. Not that we are saying that these currencies may be used illegally, but the lack of government supervision spells everything.
Imagine exchanging money unsupervised. This creates possibilities of transferring money from country to country and can be abused, such as money laundering material since it generally covers the track of the flow from its source to its recipient. This particular concept triggered immediate action from the world market.
For a fact, we define good investment material as something acknowledged and supervised by government agencies. Government and Central Banks are in place not to set certain guidelines in shaping the policies of the now popular cryptocurrencies. With the world still finding its rhythm across the new technological advancement, we cannot conclude that it is a good investment material.
Myth # 3 – Cryptocurrency is a money scheme and will cease to exist
On the flip side of everything discussed above, the logic behind the existence of these virtual money remains intact - a digital representation of banknotes that can be used as payments for goods and services. It is indeed true that with all the issues and the recent banning of some countries worldwide, it may be on a temporary halt, but it will remain as one of the marvels in this digital era.
Of all the transitions of driving into digital solutions, saving the environment from producing paper notes is environmentally friendly, efficient, and economical. Natural resources are being allocated to other relevant activities essential for living, and fewer manpower hours will mean more time to do other productive things other than manning paper companies.
With the accelerated digitalization because of the COVID 19 pandemic, the world has seen an increase in online bank platforms in transactions ranging from payments of basic goods and necessities up to non-COVID essentials in fear the banknotes may carry the virus along with the exposures from face to face transactions. Only time will tell that digital currencies will be our future options.
Cryptocurrencies triggered a transformation in the usage of money and finance concepts from a global perspective. Fact is, if this technology is governed correctly, enforcing contractual obligations and property rights, software programmed to create cryptocurrencies will be legalized. Bankers, accountants, and other money-related works and expertise will have one less worry of physically looking into notes.
Conclusion
Cryptocurrency is a breakthrough in the world of money and finance. Crypto or digital currencies have been around for more than a decade and have created a paradigm shift in how individuals and industries use the money to invest, buy and spend. However, this imperfect technology has shown a substantial potential to disrupt the worldwide financial system.
Though International Laws or Central Banks do not currently control this, the need to be under one is essential since it is currently viewed as one of the future options on digitized currencies. With proper country guidance and the mindset of doing the right thing, this has a great potential of becoming our reality and revolutionize our concept of money, which is also more sustainable and eco-friendly.
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Reference:
https://www.brookings.edu/opinions/five-myths-about-cryptocurrency/
https://www.investopedia.com/terms/c/cryptocurrency.asp
https://en.wikipedia.org/wiki/Gold_reserve
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