Crypto

Graphic by Soojin Kim

Crypto, or cryptocurrency, emerged as one of the most revolutionary advancements amid dynamic intersections between finance and technology. First mined under the advent of Bitcoin in 2009, crypto implemented an unprecedented decentralized and secure system for digital finance. Now, crypto has evolved from an esoteric concept to an influential factor in contemporary economics, industries, and technology. However, although it showcases a promising influence in shaping modern currency, crypto demonstrates regulatory barriers including its volatility,  and potential for misuse, which it must overcome to attain worldwide prevalence and sustainability. 

Crypto is a virtual form of currency that implements cryptographic techniques to enforce security behind transactions and the creation of new blocks. Compared to currently accepted forms of currency, which operate under a single entity such as central banks or governments, crypto operates on decentralized networks supplemented by blockchain technology. This decentralized framework enhances security, reduces the risk of fraud, and promotes transparency, eclipsing other conventional monetary systems. 

Cryptocurrency was introduced in 2009 when Satoshi Nakamoto, an anonymous entity, mined the first Bitcoin. However, initially, Bitcoin had no realistic value attributed during its first year of existence due to its volatility – volatility refers to the degree of fluctuation in the price of a financial block such as stocks over a given period, assessing the risk or uncertainty of the block being measured. The first recognized crypto transaction was by Laszlo Hanyecz, who bought two pizzas for 10,000 bitcoins. During the purchase, the 10,000 bitcoins were estimated to be worth around 40 dollars; however, at its highest value point in the future, the 10,000 bitcoins would be worth nearly 600 million dollars, 1.5 billion percent of its value in 2010. During an interview in 2019 about his purchase of pizza with Bitcoin, Laszlo explained, “People laugh at that, but at that time, it wasn’t worth anything.” After being further questioned, Laszlo explained that he believes his purchase of pizza with Bitcoin was a crucial step in establishing the growth of the crypto market. 

Following the constant development of crypto, the use of Bitcoin in modern society has correspondingly increased. For instance, in 2021, El Salvador became the first country to establish Bitcoin as a legalized currency. Although this legalization initially faced criticism due to Bitcoin’s volatile nature, the country’s investment in Bitcoin proved successful as the total holdings of Bitcoin increased by approximately 50 percent in El Salvador. Russia, furthermore, utilizes Bitcoin for international transactions to bypass Western sanctions placed after their invasion of Ukraine in 2022. Looking ahead, Bitcoin is projected to showcase continual growth in its prevalence as countries such as the U.S. aim to advance digital finance through crypto.

In addition to Bitcoin, other forms of crypto such as Ethereum, Ripple (XRP), and Cardano have gained global acceptance and recognition for their unique supplement to digital finance. For instance, Ethereum, a blockchain-centered network, enables developers to implement decentralized applications (DApps) and smart contracts without third-party influences, extending blockchain’s capability beyond digital finance. Ripple, similarly, has assisted the idea of digital finance by focusing on effective cross-border payments that cannot be performed with modern currency. Meanwhile, Cardano has prioritized sustainability in its process of mining new blocks, addressing environmental concerns raised by crypto mining. These cryptocurrencies, along with many others, have diversified the realm of finance, broadening the applicability and acknowledgement of crypto in many industries. 

However, despite its transformative potential, crypto has significant drawbacks within its systems that could hinder its worldwide prevalence. One of crypto’s most important challenges is its volatility due to its relatively new nature. The crypto price is not objectively marked as conventional currency; its value is highly speculative. Similarly, crypto is yet to be accepted as a standard form of currency by many private and public organizations, significantly impacting its usage and market acceptance. The process of mining and securing crypto additionally poses environmental concerns, as mining and securing crypto requires an excessive amount of energy and computing power.

Although crypto presents significant drawbacks in replicating modern currency, the revolutionary idea has exhibited its transformative potential to reshape the digital economy and industry. Through constant modifications and advancements, crypto demonstrates the potential to overcome its regulatory barriers including its volatility, environmental concerns, and security vulnerabilities, displaying its potential to foster a more efficient global finance system. As society advances into the futuristic aspects of digital technology, crypto may become an integral part of finance, surpassing the modern forms of accepted currency.