You’ve probably heard of Bitcoin, but there are more than a few hundred other cryptocurrencies in existence. These virtual currencies are backed by no country or monetary authority and are traded on numerous online exchanges. Crypto’s madcap, meme-crazed online culture can make it seem frivolous and shallow, but its roots are in a robust, well-funded ideological movement that has serious implications for our future.
The most common use for crypto is investing, with the aim of turning a profit by buying low and selling high. But it can also be used to buy products and services. Some examples include hardcover books from Barnes & Noble, a slew of video games from Steam and Nintendo Switch, and even new cell phones, which can be bought at Newegg using BitPay. You can even use crypto to buy a Lamborghini or Ferrari at dealerships like RM Sotheby’s, Ducati Indianapolis, and Taboo Imports.
These uses are often accompanied by sky-high valuations and irrational investor enthusiasm that can lead to extreme price fluctuations, making crypto unsuitable for most investors. Moreover, a lack of reliable regulations leaves crypto vulnerable to management risks and other factors that can derail investment performance.
Many investors also have a hard time separating crypto from speculative investments, which are often based on little more than hope and wishful thinking. In addition to inflated price tags, cryptocurrency investment platforms can be vulnerable to hacking, fraud, and other cybersecurity risks. Finally, some cryptocurrencies are also subject to market manipulation and other unethical practices, which can deflate their value and lead to big losses.
But crypto advocates argue that its underlying technology, blockchain, is poised to take on the internet’s role as a transformative force in our lives. Blockchains, they say, can be used to store and verify all sorts of important information that would otherwise be difficult or impossible to transfer securely. This includes medical records, music licensing agreements, and global supply chain tracking—helping businesses like Walmart track products from farm to fork and react more quickly when something goes wrong with their food supply.
To build and maintain the records that power a blockchain, computers on the network compete to solve complex mathematical puzzles using huge amounts of energy. The winners are rewarded with crypto, and the process is known as mining. Crypto proponents believe this system is more secure than traditional record-keeping systems, since it’s impossible for a single company to control a blockchain or change its contents without getting caught.
But these applications are still very much in the experimental phase. It took the internet decades to become what it is today, and it could take years for blockchains to mature into the types of tools that can actually improve our daily lives. In the meantime, they’re attracting tons of developers, an auspicious sign for any new technology.
