Cryptocurrency, the good the bad, and the ugly
What is cryptocurrency?
Cryptocurrency is a digital currency that utilizes cryptography to ensure the security of the transaction. In a nutshell, we can call it online money. You might have heard of some cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, etc. Cryptocurrency has grown exponentially since its inception, in fact at the moment around 7.000+ cryptocurrency circulating digitally. But most of them are useless or maybe even a scam. The OG of crypto is Bitcoin, the first cryptocurrency that created.
Bitcoin is
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution
Let me break it down, so the vision of Bitcoin is we can transfer the money/value online directly through the recipient without using another 3rd party such as a bank. You might wonder how is this possible, to break down the technical side require a deep explanation, but I will give you a hint. We use blockchain technology.
The Good
1.Decentralized
This is the core value of cryptocurrency. Decentralized means that not a single entity can control the whole network/system, to make it easy, just think the opposite of centralized, such as banks and government. You might wonder, why this point is considered good. In the 2008 global crisis, many banks went bankrupt and their customer is not able to withdraw the cash, which ironically because is their money in the first place. Crypto does not have a single point of failure because of the decentralized manner, if one or two entities ever failed to maintain the network, there are still thousands of other entities that still keep the network up and running. So you won’t face the scenario where you stuck transferring/withdrawing your coin.
2. Transparency
Transparency is part of a decentralized identity. Cryptocurrency uses a system where the ledger is distributed online and everyone has a copy of it. The ledger is store in the blockchain to make sure that the data inside is immutable. The system is so transparent that we can see the rich list from all owners of the coin, not only rich list, we also can see when and where the coin is transferred.
3.Store of value
As fiat money (USD, GBP, IDR, etc) has inflation because the government just keeps printing them, where this might give a beneficial effect on macroeconomics but from a microeconomics perspective, this hurt the value of the fiat money in the long run.
Bitcoin, on the other hand, always store its value. I know, you might hear of the 2017/2018 Bitcoin bubble where it’s crashed from $19.000 to $3.000 in several months, that’s is from the USD perspective. Meanwhile, during this pandemic, many countries took a hard hit that damaged their economy. Take Brazil as an example, the Brazilian Real value keeps decreasing because of inflation. That 2017/2018 Bitcoin bubble you keep hearing, is nothing for the Brazilians if they just kept the Bitcoin, in fact, fiat wise they already making profits. Their many other countries that face the same condition as Brazil, such as Argentina and Venezuela.
Bitcoin retains its value by having a fixed supply of 21 million. If fiat has inflation, then Bitcoin has the opposite of that which is deflation. Meaning that at a certain point there will more demand in the market than the supply of the Bitcoin itself.
The Bad
- Tons of scammer
Who knew that in the decentralized world there are also scammers around. As mentioned before, there are approximately 7.000+ cryptocurrencies out there. What defines that the coin is a scam can be traced from the development of the project. Many crypto projects conduct an ICO to gather investment but the project didn’t run well and every team on the project just abandoned the project which makes the coin is “dead” because it has no further development. According to Coinopsy, there are 1702 that considered failed ICO. In crypto, is hard to sue the project that went scammed because we don’t even know where the team is allocated and even the legal identity of the project. That’s why ICO is considered a high risk and high reward investment.
The Ugly
- You can lose all of your money
In crypto, we have this rule of thumb
“Not your keys, not your coins”
It is basically said that if you do not own the private key of your wallet, is technically not yours. Even if you have some coins in the exchange that legally yours, but all exchange have the risk to get hacked or even worse, scam exchange. Hacked exchange in crypto is quite common, in fact, there are approximately US$867.45 losses from the hacked events. I personally have lost around $10k from the Cryptopia hacked and it was devastating.
Recent crypto hacked exchange happened in 2020 is the KuCoin exchange, where the hacker has stolen $150 million from the user’s money. That being said, if you ever want to dive into this space or maybe just want to try this new technology, I suggest following the rule of thumb. It might be a bit hard and take some effort to learn creating and storing your own wallet, but trust me, in the long run, it’s all gonna be worth it.
