Cryptocurrencies: The Currency of the Future?

John David Hagood, Staff Writer

Cryptocurrencies such as Bitcoin have seen massive growth in use over the past decade since the publishing of the original white paper “Bitcoin: A Peer-to-Peer Electronic Cash System.” This single paper revolutionized cryptocurrency by providing the blockchain cryptography required for a completely virtual and decentralized currency. 

Because this paper allowed Bitcoin to no longer require a third party that users would have to put their trust into, such as a bank, many other cryptocurrencies followed Bitcoin’s lead such as Ethereum, Cardano and Dogecoin. However, the proliferation of this radically different system of currency has led many to question its viability. Are cryptocurrencies just a fad that made a couple of techie eighteen-year-old millionaires or are they here to stay? It is my prediction that cryptocurrencies will continue to grow and establish a permanent spot in our economy, quite possibly replacing the banks we have today.

It is certain that cryptocurrencies are not going anywhere anytime soon. The decentralized architecture of cryptocurrencies means that it is virtually impossible to “shut down” a currency. To do so, one would have to terminate all the programs running on computers running the cryptocurrency software. This is simply impossible.

 Cryptocurrencies have also seen major growth in their acceptance. Companies like AMC and Tesla have histories of accepting Bitcoin. Apps like PayPal, Venmo and Chah App have also added options to buy and sell crypto on the apps. Even football star Odell Beckham, Jr. has requested his entire salary be paid in Bitcoin. 

Cryptocurrencies have demonstrated superiority to traditional banking in multiple facets. The security of transactions carried out far exceeds that of centralized banks. The very nature of the blockchain algorithm guarantees this. Furthermore, crypto could provide more economic opportunities for people to get access to formal financial services through centralized banks. With low transaction fees, thanks to the absence of banks, not only is crypto the only option for these financially underrepresented people, it is often the best option.

The main argument against the adoption of cryptocurrencies is often their volatility or enviromental impact. The exchange rate of bitcoin can change over the course of a transaction. That $10.00 you spent at the start of your transaction may have fluctuated in value considerably by the time the transaction is verified. However, cryptocurrencies are still in their infancy. As they gain more acceptance it is likely that they will be able to withstand the volatility that plagues them now. The impact of cryptocurrencies on the environment is undeniable. Bitcoin alone uses 0.5% of global electricity and a single bitcoin transaction is estimated to burn over 2,000 kilowatt hours of energy. This massive amount of energy used is due to the proof of work cryptography (PoW) built into bitcoin. This protocol has many computers competing to see which computer can generate a number to fall at the end of the block chain such that when the cryptographic hash function is applied, it meets certain standards. A lot of computing power is wasted with incorrect guesses through this competition. However, a newer protocol is now gaining popularity to generate the blockchain, proof of stake (PoS). This newer protocol allows for a massive reduction in the power consumption required for cryptocurrencies. It is likely that many cryptocurrencies will use the PoS protocol which will greatly reduce the environmental impact of cryptocurrencies in their growing acceptance.

Cryptocurrencies are still very new. While it is truly impossible to say anything about the financial future for this technology, it is my prediction that crypto will continue to grow in acceptance and usage. This growth will allow cryptocurrencies to become less volatile and more practical in everyday use. The lower transaction fees and increased security over centralized banks will only increase the popularity of crypto. I believe this to be the next step in the evolution of how we handle financial transactions that all of us will come to accept in our lifetime.