What is store for the cryptocurrency near-future? More ICO’s (Initial Coin Offerings) or a slow realization that public blockchains are risky?
In the realm of the digital, cryptography is definitely a contender for your money. Not unlike your retirement plans, savings accounts and the cash hoard under your mattress. You might also be surprised that cryptography is changing more than finance, however.
Cryptocurrency is creating its own financial vortex. An ever growing singularity threatening to unravel, not only the monetary systems in place today, but the social systems upon which they rely.
What would happen if the state money you have in your bank went the way of the Dodo Bird? Would you use gold, silver or a cryptocurrency to get you through the bad times? Perhaps a lesson is unfolding right before our eyes.
The average Venezuelan could tell you about bad times. Their economy continues to nose dive as their monetary system crashes. Social services, food, water, medicine? All hard to come by. And it is a result of policies that made their money evaporate. They simply “printed” too much and it — their entire social system — is dying as a result.
…cryptocurrency can be hidden much easier than silver coins.
Is bitcoin propping up the average Venezuelan citizen today? Certainly, it is helping. Government agents cannot reach into the Bitcoin Bank and take your money. They can, however, force you to give up your passwords and make you transfer your funds to them. Unless you use a third party service. One in another country that refuses to release your funds.
In short, cryptocurrency can be hidden much easier than silver coins.
More specifically, it is in cryptocurrency that many of us place our hopes and dreams. But are our hopes misplaced? Is this new fin-tech space a mere blip in the larger scale of the Information Age?
If bitcoin cannot be “over-printed,” by design, what is it really? A steadily valuing asset, so long as we keep using and buying and trusting it? Trusting a digitized currency?
Many of us already know the risks involved with Bitcoin or any cryptocurrency. You can stand to gain, maintain, or lose your proverbial behind. Billions of dollars of real money have been made during this ongoing; and certainly speculative run up. Values continue to climb, then retreat, and most unfortunately, the system itself, especially the most popular cryptocurrency of all, bitcoin, is showing signs of strain.
We can make comparisons all day. The Dot.com bubble. Tulip Mania. Speculation. A craze. Decentralized money. Be your own bank. Smart contracts. The World computer(s) galore.
Every Tom, Dick and Harry has a new idea…
Every Tom, Dick and Harry has a new idea for a new cryptocurrency. Just as every new company has new stock. Whole countries are “testing” the waters, allowing the new non-state monies freer reign.
And choices are great. Eventually, however, the most efficient tech will surpass the rest. Just as large home computers gave way to tablets then smart phones, the fastest and most secure systems — the most trusted — will win.
Reliability is also key. You can fix it if it breaks, but you might lose your customer if it breaks for long. For example, I really liked Peercoin when it first came out. An unknown developer (Sunny King) who sort of kept his or her distance. An energy efficient system. It seemed more decentralized, even if it was not private — meaning others could see my balances and purchases. All the same, when Peercoin broke — forked — I was ticked off. Never again did I invest. Well, maybe once or twice, but I steered clear of the software. Just traded it.
Central control is another concern. Central authorities like our various governments often step in to assert that money must be controlled. To protect us. Bitcoin itself was the antitheses to centralized control. Today, to state that Bitcoin is decentralized would be stretching it.
Large computational warehouses churn out Bitcoin’s life blood. Many are in China. The sheer amount of electricity used to continue this process is staggering. And China is by no means a free country, but are any countries truly free these days?
Power consumption. If we use the United States as an example it is estimated that Bitcoin miners worldwide use nearly the same amount of electricity as nearly 300,000 homes. An argument for Bitcoin’s value to be sure. Even so, this very fact makes the giant Chinese Mining warehouses targets.
Is Bitcoin money? Does it have a real value? Why does it continue to thrive? These are all great questions and many have chimed in — attempted to answer them. In truth, there is no simple answer.
So what happens next?
Will whole regions compete with their favored cryptocurrencies? Will the public blockchains rule or will private ones begin to take market share? Will governments give certain companies special rights to sell their wares, so long as they are complaint with all of the reporting requirements? Does this latter situation not break all the rules of cryptocurrency?
And the “next” is already occurring. The herd is moving in the fields, but the fields are fenced-in. Slowly, the acreage will be sectioned off. A divide and conquer strategy.
Will it be bad? Not initially. Not until the authorities begin to demand changes to the code to allow several things. Easier snooping and taxation. Eventually, not unlike Peercoin, the social engineers will ask the ultimate sacrifice: faster inflation. That will spell the end of it.
There are no places to hide. Yes, companies can hock their wares — sell their crypto-goods — with governmental permission. They can report all account holders and take names. They can play the game.
Many of us will use these trusted public blockchains. Many of us will unknowingly use the current banking systems, unaware that they will soon be using Ripple or maybe Stellar Lumens or some other well researched, official and “approved” system.
There are a few cryptocurrencies remaining that, as of yet, have refused to comply with authorities — completely. They also have better reputations that most. Monero and Aeon. Their developers remain, mostly, anonymous. A good and bad thing. As a result, there are fewer markets. Fewer places to purchase these relatively private cryptocurrencies. But they are far more secure and private than most other competitors.
It reminds me of Prohibition in the United States beginning in the 1920’s and even the current laws against drugs today. What happens when people are told that they cannot buy and use something they want? In the end the price goes way up. A sort of “valuation wave.”
Is this what is in store for Monero and Aeon?