Cryptocurrency has gained popularity since the creation of Bitcoin in 2009, reaching a market value of $1 trillion today. The boundless capabilities and opportunities possible with cryptocurrency can disrupt global banking systems. Cryptocurrency has become a contentious topic, with proponents believing digital currency is the future of money, potentially transforming the banking system globally. At the same time, critics argue that the lack of regulations on the use of cryptocurrency will empower criminal organizations and terrorist groups. Furthermore, critics believe that some countries, such as the US, are already considering investing in cryptocurrency, such as Central Bank Digital Currencies (CBDCs), to compete with the surge of digital currency, which might cause an unequal distribution of financial resources. This essay will evaluate the divergent perspectives associated with cryptocurrency to determine whether it embodies the future of money or is a total scam (“Cryptocurrencies, Digital Dollars, and the Future of Money”).
Firstly, cryptocurrency can be defined as decentralized blockchain networks, such as Bitcoin, developed by Satoshi Nakamoto in 2009, and it is exchanged between individuals with virtual wallets. Cryptocurrency transactions use blockchain technology and are recorded publicly on a tamper-proof distributed ledger. Using an open-source, decentralized ledger to record and initiate transactions eliminates the need for third-party validation, such as banks. Since its development in 2009, Bitcoin has become the most popular cryptocurrency, with a market share of over $1 trillion. The success of Bitcoin has led to the emergence and proliferation of other cryptocurrencies, such as Ethereum, Dai, and Word Coin, because of their distributed nature and quick and secure transactions (Agarwal et al.).
Additionally, the decentralized nature of cryptocurrency has transformed and automated cross-border transactions by eliminating third-party validation, making this transfer quicker and cheaper. Traditional banking systems require third-party authentication or a central bank to authenticate cross-border transactions between various baking systems before the money can arrive at the desired bank. However, using cryptocurrency eliminates the need for a middleman, as cryptocurrency is based on digital assets distributed over huge computer networks.
Furthermore, cryptocurrencies are based on decentralized computer networks that ensure transparency of transactions between individuals on the public network. The distributed blockchain ledger records transactions immutably and transparently to guarantee openness and accountability. The decentralized nature of cryptocurrency has made it popular since it eliminates the chances of fraud and corruption as the transactions are verified by all people within the peer-to-peer network. Eliminating third parties involved in conventional banking systems has increased confidence in blockchain, promoting cryptocurrency’s appeal as the future of financial systems.
Moreover, cryptocurrency accessibility offers convenience and effectiveness in cross-border transactions. The decentralized characteristics of blockchain promote global transactions by eliminating third-party authentications and promoting financial inclusion for both banked and unbanked people. Cryptocurrency is not limited by geographic or bureaucratic rules, making cross-border transactions quick and cheap. Besides, the proliferation of smartphone technology and digital wallets improves accessibility by allowing people from diverse backgrounds and geographic locations to engage in financial transactions. Consequently, cryptocurrency accessibility has the potential to reshape banking systems, making it the future of financial transactions (Islam et al.)
Nonetheless, the volatile nature of cryptocurrency undermines its credibility as a medium of exchange. According to (Zaman) the volatility of cryptocurrency was observed in 2022 when an investor lost billions of dollars when the seven biggest cryptos collapsed. In the last few years, significant market collapses from cryptocurrency have caused significant losses to many institutions and banks worldwide.
Similarly, the lack of comprehensive regulation in cryptocurrency exposes it to various challenges, such as fraud, cyber risks, and market manipulation. The lack of adequate oversight has resulted in the rise of fraudulent activities and the exploitation of unsuspecting investors. Blockchain technologies and cryptocurrency have been targeted by major cyber-attacks and fraud targeting unsuspecting individuals, leading to significant loss (Shreya et al.).
Finally, the limited adoption of cryptocurrency in everyday transactions impedes its prospects as a medium of exchange. This can be attributed to price volatility and regulatory ambiguity, which deter merchants from accepting cryptocurrency as the future mode of exchange. Cryptocurrency needs more traction to become the future medium of exchange due to its lack of acceptance in everyday transactions. Overcoming this limitation will promote cryptocurrency acceptance and allow it to become the future mode of exchange. However, this will require collaboration between various stakeholders to eliminate price volatility and regulatory ambiguity.
Ultimately, cryptocurrency has the potential to become the future of money due to its immutability, transparency, and elimination of third-party authentication, making cross-border transactions faster and cheaper. However, for merchants to recognize and accept cryptocurrency as a mode of exchange, issues like price volatility and regulatory ambiguity must be eliminated.
Work Cited
Agarwal, Udit, et al. “Blockchain and Crypto Forensics: Investigating Crypto Frauds.” International Journal of Network Management, December 7, 2023, https://doi.org/10.1002/nem.2255
“Cryptocurrencies, Digital Dollars, and the Future of Money.” Council on Foreign Relations, 2021, www.cfr.org/backgrounder/crypto-question-bitcoin-digital-dollars-and-future-money. It was accessed on March 4, 2024.
Islam, Md. Mainul et al., “A Low-Cost Cross-Border Payment System Based on Auditable Cryptocurrency with Consortium Blockchain: Joint Digital Currency.” IEEE Transactions on Services Computing, vol. 16, no. 3, 2022, pp. 1–14, ieeexplore.ieee.org/abstract/document/9894089, https://doi.org/10.1109/TSC.2022.3207224.
Shreya, Sangal, et al. “Blockchain’s Double-Edged Sword: Thematic Review of Illegal Activities Using Blockchain.” Journal of Information, Communication, and Ethics in Society, January 23, 2024, https://doi.org/10.1108/jices-04-2023-0061. Accessed March 5. 2024.
Wu, Jiajing, et al. “Analysis of Cryptocurrency Transactions from a Network Perspective: An Overview.” Journal of Network and Computer Applications, vol. 190, June 2021, p. 103139, https://doi.org/10.1016/j.jnca.2021.103139.
Zaman, Monisha P. “The Recent Scandalous Crypto Collapses: Regulatory Prospects on the Horizon? | Manchester Journal of International Economic Law | EBSCOhost.” Ebsco.com, vol. 20, no. 1, Apr. 2023, p. 84, https://doi.org/%22, accessed March 5, 2024.
write