Depending on who you ask, Bitcoin is either the greatest innovation of our time or a massive bubble, ready to burst at any moment. The champions of both sides (investors and entrepreneurs on one, bankers and authorities on the other) have one thing in common – they have a horse in the race. Neither side can be wholly trusted, and as usual, the truth is more than likely somewhere in-between.
There are plenty of articles and videos warning against the dangers of cryptocurrency. Recently the BBC’s ‘Panorama’ released a programme Who Wants to Be a Bitcoin Millionaire? that explained the basics of blockchain technology and highlighted some of the ways it has been (or has the potential to be) misused. While informative, the BBC’s coverage focused almost exclusively on negative aspects of the technology, which is the same approach as most blockchain technology critics.
But do some of the more common/superficial criticisms of the technology stand up to scrutiny? Is there any reason for much of the fear generated by its critics? Let’s see.
Whenever the anonymity of crypto transactions is mentioned as a selling point, there is likely to be a dissenting voice pointing out that anonymity can facilitate lawbreakers. That’s a good point, well worth exploring, but that doesn’t mean the issue is clear-cut.
Fiat currency already does a great job of anonymously facilitating crime. If you’ve ever watched a gangster movie, you’ve seen exactly how it works. No respectable criminal carries out KYC checks or provides receipts/return addresses for their services. They usually deal in cash, and they do so in secret.
The reality is that whatever system you have in place, people will abuse it, but presently crypto is only responsible for a tiny fraction of illicit payments because most of us choose to live within the law.
Anonymity ensures the protection of our sensitive data that is often stored and sometimes lost when stored by third parties. The question is, do you think it’s necessary to provide all this information every time you spend your money or doesn’t it matter as long as the right person gets paid?
When Satoshi Nakamoto published the Bitcoin white paper, she/he/they may not have expected investors to jump on the back of it. The white paper certainly is much more concerned with creating democratic money, putting emphasis on the individuals’ ability to control their funds autonomously – but the resulting value attributed to Bitcoin has caught the attention of would-be scammers.
Again, this is a valid concern. Regulators have been slow to keep up with the popularity of cryptocurrency, and there aren’t many safeguards in place to protect the average person from scammers. Until regulators catch up the individual’s needs to educate themselves and remain vigilant, take nothing for face value and realize if something seems to good to be true, investigate and see if you might just be right. And, if you invest in crypto, never invest more than you can afford to lose.
‘You can’t hold it in your hand.’
Do we need to cover this? That’s exactly the point.
Tangibility is the weakest argument against crypto, but it is a common one. The argument that cryptocurrency isn’t ‘real’ money because you can’t hold it assumes that somehow being able to hold it attributes value, but it doesn’t.
Cryptocurrency’s value, as with any other currency, is intrinsically linked to the trust people have in it. You don’t recognize a sheet of A4 as currency because you know that it’s just paper. You can hold it, but you can’t take a ream down to your local supermarket and exchange it for groceries.
We think differently about fiat currencies; we trust in their value because these currencies are backed up by gold, or oil. That’s confidence in a nutshell, and fiat is only worth more than the paper it’s printed on because of that confidence.
The fact we can hold it in our hands is familiar, and that’s a comfort to us, but it has little bearing on its value. Crypto has that same confidence; people trust the technology and each day more businesses are recognizing it as a legitimate form of payment.
Fear of the unknown
Blockchain technology is still in its infancy, and many are wary of it. Some are reluctant to see the technology thrive, and I’m not necessarily talking about banks – although they will not relinquish their control of money without a fight. Ordinary people are used to the systems we already have in place. Systems they’re comfortable with. How many times have you heard the phrase ‘I’m happy with things just the way they are’?
We’re naturally reluctant to change. Reluctance isn’t something that can be quantified, but it is a huge obstacle that will need addressing if the use of digital currencies is to become widespread. All innovations face the same problem, but from the first motorcar to the internet and mobile banking, the right innovation can offset these fears and change the world.
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Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.