The Internet changed everything and gave opportunities to our society that we never had before. Back then people already realized the potential for it and tried finding new ways to make use of it. Now we have hit another revolutionizing and promising technology: Cryptocurrency. It is still fairly new but more and more people believe in it or at least show great interest in its development.
However, the problem with new technologies, especially when it comes to sharing information and making transactions, is that there are no laws or regulations for it for a long time. Even for the internet, most laws that regulate physical businesses don’t actually touch online businesses but are rather extended and tried to be interpreted in that context.
Governments also have trouble figuring out how to regulate cryptocurrency and it is much more difficult because of its anonymous nature. To summarize cryptocurrency, it is based on blockchain, a ledger that records and stores transactions. The most popular cryptocurrency is Bitcoin. You can send and receive Bitcoins that can translate into real world money anonymously and safely through blockchain. Because it is anonymous, law makers can’t track that money and can’t tell if something was a business transaction that should be payed taxes on.
Also, the value of one Bitcoin fluctuates a lot. The value is not based on a company’s revenue, CEO or anything affecting stock prices but is solely based on consumer sentiment. If people trust the currency and think it will be valuable more later, the price of one bitcoin goes up. If there is a lot of fluctuations, people can sure buy and sell Bitcoins like a stock but it is so unreliable because it is not based on news etc. It seems like it is an investment more so than a currency because we can’t really use it in real life if it fluctuates this much. If we buy real world products or services with it, someone might get screwed over by the same amount of Bitcoin not being worth as much the next day as it was when the transaction occurred. Further, a small amount of people might own a big part of all the Bitcoins available, which means that they can influence and manipulate their value easily.
There are some cryptocurrencies that are based on a different currency like the US Dollar. However, this is hard to accomplish in code and also has the problem of not every US Dollar actually being in bank accounts as they are thought to be (because banks keep a record of what you own but can give away your money to someone else as it is assumed that no one will clear their bank accounts all at once).
While having anonymity with transactions is comforting and makes us and our personal information save, there does need to be a way for authorities to be able to check transactions for business transactions or even crime related transactions. It will likely take still a long time to figure that our as well as governments to actually make new laws that cover things like blockchain and cryptocurrencies. Until then what do we do?
Another problem with this is also that Bitcoin needs nodes and their power to be powered by it. Now, miners have the incentive of receiving Bitcoins for their efforts. Miners use strong computing powers to try and solve a block, the person or people that solve that block first, receive 12 Bitcoins (1 Bitcoin is currently worth around $6.000). Companies dedicated to mining have a lot of computers working on a block but a single person can join mining pools with other individuals to have a better chance at cracking the block. The question is, why would those miners keep running their computers and spend money on electricity etc. when there won’t be Bitcoins left to be mined?
There are a lot of opportunities with cryptocurrency but equally as many questions and problems to be solved. How can we stabilize those currencies and stop people with large amounts of Bitcoin to sell or buy a lot at once, manipulating the value? How do we make sure taxes are payed and authorities can track important transactions? Will it even keep running and who will be responsible to keep Bitcoin running?
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