While the world sits and debates these pertinent questions about ‘Cryptocurrency’, this relatively newer kid on the block(chain) has grabbed a lot of attention for the right and the wrong reasons, both.
A little background about Cryptocurrency
Cryptocurrencies are ‘digital money’. Pretty much the same as credit cards, but hugely differing in regulatory controls and the way data is distributed. As against the data for credit cards which has a single centralized database, this is decentralized and shared across thousands of computers worldwide.
Popular Pro-vote: Cryptocurrency advocates believe that this technology will eventually replace traditional money like the US Dollar or the British Pound or the European EURO which are some of the currencies accepted globally.
The Staunch Supporters – Let’s hear from them
1. The die-hard investor’s poster-boy-currency: This is one of the popular investment tools, those who invested in Bitcoin early on, made a lot of money. Bitcoin, skyrocketed in value over the past few years. The price of a single Bitcoin has even touched $63K+. The total value of all cryptocurrencies is estimated to be more than $2 trillion.
At the moment, cryptocurrencies are largely preferred as an investment tool like a stock or a commodity, and not as much to buy real things in the real world.
Anti-vote: They say that cryptocurrency has no intrinsic value and is better off as an investor’s delight than the regular currency we use every day.
2. Good for ‘large’ and ‘global’ transactions: Makes for a good currency when traveling or for transfer between different locations, especially for banks and organizations that deal in large transactions all the time.
3. Go without intermediaries: Cryptocurrency transactions are without intermediaries making them far more efficient, faster, and cost less. A huge advantage over traditional currency.
Anti-perspectives on Cryptocurrency
Let’s discuss a few key ones here:
1. Environmental impact: Energy expenditure, fossil fuels, CO2 emissions:
A lot of energy is used in mining cryptocurrencies. The Bitcoin network requires as much energy as the entire country of Argentina, in one year (!) — ~121 Terawatt-hours of electricity every year, as per BBC. According to Dichotomist, a cryptocurrency analytics site, Ethereum (another Cryptocurrency) uses as much power as the entire nation of Qatar. Moreover, 65% of this energy is used by the miners in China, which comes from ‘coal’ as China still relies on ‘coal’ for a sizeable part of its energy requirements. This in turn increases the carbon footprint, placing the environment in jeopardy.
The next question to pop – ‘Why does cryptocurrency require so much energy’?
Here’s the answer: These abominable costs typically arise out of proof-of-work type of blockchains, such as Bitcoin and Ethereum. These use a decentralized network of miners to store account balances, further made important to miners by block rewards. They require specialized computers to record new blocks, which can only be created by solving cryptographic puzzles. These computations require huge amounts of energy.
Cryptocurrencies without mining do not require as much energy
A large number of other cryptocurrencies have negligible environmental consequences. For example, proof-of-stake blockchains like EOS and Cardano do not have mining, which entirely negates the need for high energy requirements. This means transactions can be processed with the same energy requirements as any normal computer network. Ethereum’s plans of upgrading to proof-of-stake have been pulled down time and again by miners, who stand to benefit from its current way of working.
2. E-waste: The second stumbling block in the adoption of Cryptocurrency is the e-waste generated by cryptocurrency mining. This happens as the hardware used in mining becomes obsolete. The bitcoin network is said to generate 11.5 kilotons of e waste every year! Unlike other computer hardware, these circuits cannot be reused for any other purpose, and become obsolete faster.
Ready to stay and slay?
Love it or hate it, Cryptocurrency has made its way into our lives stealthily, if you please. As a potential gold mine, there are the optimists and opportunists and the habitual investors looking for a rich harvest, who give Crypto a thumbs-up. Some choose to go against the new wave, saying it is more likely to cause more harm than benefit to humankind. A case in point was Elon Musk retracting his decision of allowing people to pay by Bitcoin for Tesla cars.
Each of us will need to decide for ourselves if crypto is here to stay. We, at Techvio, believe that crypto and blockchain are the future. The idea of a global virtual currency, protected from FX fluctuations or hedged against inflation, is indeed an interesting one. The challenge that crypto is facing in terms of energy usage, or intangibility will soon fade away. Every new technology such as eCommerce, credit cards, AI, AR, etc has always had skeptics, but they have thrived. We believe the same thing will happen with crypto. It will become mainstream in the next 3-5 years and will no longer just be a vehicle for people to make a quick buck. This is here to stay.
The views expressed here are solely of the writer Vijaya Rao.
https://www.investopedia.com/tech/whats-environmental-impact-cryptocurrency/ https://fortune.com/2021/05/13/musk-bitcoin-mining-bad-planet-heres-how-bad/ https://news.yahoo.com/are-cryptocurrencies-ready-to-go-mainstream-190224417.html