I would like to announce a congratulations before we begin our true discussions. A personal mention to all cryptocurrency buyers and sellers who managed to analyse the markets and trends before making trades, which allowed them to make a great investment in such a small period of time. I'm glad to say, you got out before it was too late! However, this message, for the moment, only extends as far to those who saw the opportunity, not to those who actually believe in using these individually made cryptocurrencies as an actual currency. To be one of these individual cryptocurrencies, or user, you are under the belief of a currency that can be all of a sudden used at such a high price, making many rich.

 

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In normal circumstances, when a new currency is introduced, people who have the previous currency can replace their money for a period of time for a base rate at the bank. This method is in place so that in theory everyone starts at the same place they left off, only with a different exchange rate and/or amount of the currency printed.  

 

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Remember (before reading on)

 

When reading my articles, always have your own opinion when reading it and do your own research as I can often be wrong or shift my perspective on the issue at hand in a later date.

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Knowledge

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To whom it may concern, I am about to explain my knowledge of cryptocurrencies. To my understanding a cryptocurrency, such as Bitcoin or Ripple, is a currency that cannot be printed from a third party. Moreover, on most of these currencies there is a cap. To get the currency, in most cases you can get specific parts to a computer for greater success but essentially you just press mine on a website after a few steps and eventually a few of the coins can be received until a cap. This money can then be used in actual transactions or traded into other currencies. That is why many call cryptocurrencies the "digital gold" but gold importantly has intrinsic value. Despite these currencies not being printed or mined, after a certain point, just like any currency, they are based on trust as they are only paper. The algorithm itself is although complicated, can found and made fairly easily and that is why so many cryptocurrencies are so similar. Many cryptocurrencies also cannot or find it hard to receive patents as many are not unique. The cryptocurrencies often include a block chain, which makes the buyer and seller anonymous and unable to be hacked or located. This is why you hear so much about the dark web and other black market places using cryptocurrencies with a block chain.

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Positives

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The number one attraction to most people is the fact that the cryptocurrency cannot be printed by a third party when they please. This is because many people have lived through or studied situations such as the results of the 2008 financial crisis or Wall Street Crash in 1929 and know that these are cycles that don't stop.

 

In a utopian world, this idea of inflation would not exist as governments and banks would have enough money or smart legislation to bail people out who made bad or overvalued deals without printing additional money. Though this would be great, we all know to well that there will be a transaction in the future or external event affecting the plan in place that will cause the breakdown of an economy, causing for solutions, which often come in the form of printing money.

 

Subsequent to World War Two, the United States started the Truman Doctrine (1947) and Marshall Plan (1948), which involved printing a large amount of money to allow poorer, mostly Eastern European, countries to rebuild (I know communism and "dollar imperialism" were also reasons). These actions helped many countries get back on their feet and stop the world falling into a deeper post war crisis. Printing money is a common problem for a solution as inflation only hits later when it's discovered of the printing. When a country prints money, the extent of it is often not fully known to the public until later, meaning once the news breaks, the currency is far less valuable. This can then cause if done badly mass inflation and a crisis, especially if governments use it to pay bonds.

  

A way that a cryptocurrency could be used is if the governments controlled them and everyone used the same currency. This idea of a 'one currency world' has long been debated. If a one cryptocurrency managed to be established, it would mean that poorer nations could be trusted more and there would be no inflation crises, which would help everyone. However, the main problems of this would trust in who ever has the rights of control and forcing others to use the currency (this could be achieved through sanctions).

 

This futuristic idea of using the only credit cards and the internet for transactions could also be helped by cryptocurrencies as it is an algorithm so could be transferred onto digital devices easily. The blockchain could also help security for the users. Contrasting this, the Dollar and many other currencies are digital at the moment as well as physical so the only real big argument for individual cryptocurrency lovers who are not in it to embezzle cash, become rich unfairly or use it for the black market is that third parties shouldn't be allowed to print.    

 

Negatives

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A big issue, which many face is understanding the currencies. This is why the cryptocurrencies are so volatile at the moment. One thing is for sure and that is as long as the exchange rate continues in this unorthodox stable fashion, it cannot be used. Imagine going to the corner store and bringing two Bitcoins, which was equivalent to 1 pound but as soon as you arrive, that amount which was originally enough to buy a candy bar is now in 30 minutes only worth 50 pence.

 

Furthermore, a cryptocurrency not controlled by the government (what I call an individual cryptocurrency) will never be allowed as governments always want control. This can be seen by China announcing that all trading by financial institutions must cease to exist on cryptocurrency at the moment. New York have made almost impossible legislation for cryptocurrencies to thrive, and over ten nations have banned the leading cryptocurrency Bitcoin, including China and Russia.

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Part of the reason for this is security. If anyone has seen the movie the dark web, they would be able to see the amount of illegal transactions used with Bitcoin or other cryptocurrencies. This is why many countries fight hard to keep it out as it is like an underground tunnel causing a spike in illegal activity.

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The biggest issue that governments have with cryptocurrencies is that tax is not easily tracked on them, causing millions of pounds to be easily embezzled using them. This does not need explaining to why governments have a mountain of a problem here.

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This transition to cryptocurrency would also take time as people would have to feel they understand it and legislation would have to pass about the cap and when the cap is removed for reasons such as an increase in population.

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One thing is for sure though in my opinion. Any individual cryptocurrency will crash, but knowing when is a whole different debate! The Bubble is about to Pop...

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I would love to hear your opinion and what you thought of the article. 

Comment Below

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