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The London Fintech week held in July 2018 was attended by companies from all over the world, despite the recent decline in overall crypto market cap there was a positive atmosphere at the event. Some highlights of the event and arguments for and against holding crypto currency are below:
You are in control of your own money
Unlike gold or cash, cryptocurrency allows you to trade with anyone, anywhere in the world, at any time. You don’t have to be in the same physical location as them. So in this respect, cryptocurrencies can be much more versatile than gold, and still more versatile than cash. And because cryptocurrencies are completely borderless and international, unlike cash, it could be accepted by anyone in any country in the world.
If you lose access to your crypto – like by losing your private key or wallet recovery phrase – it is gone forever. Just as no one can take your cryptocurrency from you, no one can restore it for you either.
You are not tied to the fortunes of any one nation
Say you live in Venezuela and deal with inflation at 25,000% if you convert your money into bitcoin, it’s going to be much more stable than if you keep it in Bolívar. You’re not going to end up trying to buy bread with wheelbarrows full of money. And if you’re living in a country that imposes capital controls and bank withdrawal limits, again you can simply trade in cryptocurrency instead.
The appeal of cryptocurrency in a sick country such as Venezuela is obvious, it takes away the need to trust the government and the banks, and puts some control in the hands of people living in a place of chaos. For now, bitcoin is mostly accessible to Venezuela’s middle and upper class, those with college degrees and often multiple passports or access to bank accounts outside of the country. But necessity is the mother of innovation, and perhaps, unlike most prior technological inventions, bitcoin will be driven into the mainstream by economies that are failing rather than thriving.
Because cryptocurrency is independent from nations’ currencies, it is highly volatile. Bitcoin has dropped from $20,000 in December to around $6,000 today. That’s nothing compared to Venezuela’s 25,000% hyperinflation. But it’s a massive drop compared to the value of the pound or the US dollar. By the same token, bitcoin will regularly double or even quadruple in value. You can’t really plan for the future if the value of your money changes that much and that fast.
Right now cryptocurrency pieces run on almost pure speculation. As adoption increases, the prices may become more stable, but they will still never be as stable as a traditional currency. A caveat here is the invention of “stable coins”; these are cryptocurrencies that are pegged in price to a given fiat currency. For example, USDT is a cryptocurrency that’s pegged to the US dollar. But then, you’re back to being tied to the fortunes of one nation. I suppose you could get a stable coin that’s pegged to a basket of world currencies though. That might negate the problem a bit.
Most cryptocurrencies are completely traceable. People think they’re anonymous, but they’re not. This is both a good and a bad thing. Firstly the good. Traceability leads to accountability. If all banks ran on blockchain tech, they could be held accountable for their corruption. The roots of the financial crisis would have been able to be traced, and those responsible could have been taken to court. All the evidence would be right there on the public ledger.
Traceability may sound great for businesses. But it’s not for individuals. Let’s say you buy a coffee from a street vendor. That street vendor now has your wallet address. They can see or trace every transaction you’ve ever made. They can see exactly how much money you have and all of your previous purchases. If they were of a criminal mind they could work out your routine and plan a robbery. This might sound far-fetched. But there are now a number of high-profile cryptocurrency robberies, most of which involve torture and beating. You can secure your crypto as well as you like, but you’re still susceptible to the $5 wrench attack. Therefore privacy cryptocurrencies like Monero were invented. Most people think these privacy cryptocurrencies are solely used by criminals, but that’s not true.
It is decentralised
This one filters into many of the other points. Because no one entity owns or controls it, it can’t be manipulated or diluted. There will only ever be 21 million bitcoin. No one will be able to “print” more after they are all mined. The network is maintained by thousands of people all over the world. (Well, it’s actually getting pretty centralised now, with massive mining pools, but I’ll cover that in another article.) No one can shut it down or censor it. If a corrupt regime doesn’t like bitcoin, bad luck, there’s nothing they can do to stop it. It truly takes the power away from the corporations, from the government and from the middle-men skimming off the top and puts it directly into the hands of the people.
Because it is not controlled by any one entity, there’s no one you can turn to when things go wrong. Someone mugs you and steals your crypto? Sorry, they police can’t reverse the transaction. It’s gone. You get hacked. Sorry, your money is gone. You buy a product and it never gets delivered or it turns out to be a scam. Sorry, no one can reverse your transaction. Your money is gone.