Cryptocurrency has been a topic ablaze in national news. One of the richest men in the world, Elon Musk tweets about Bitcoin and other cryptocurrencies often. As of March 2021, Forbes reported Tesla, a company of Musk’s, owned over 40,000 Bitcoin which at that time had a value of nearly 2.5 billion dollars.
CSNBC reported in June that while Musk briefly accepted Bitcoin as payment through Tesla in 2021, he stopped in mid-May reportedly due to the effects of mining on climate change. Mining requires a lot of energy to create and store the Blockchains which hold Bitcoin and other cryptocurrencies. Despite all the attention, the digital assets like Ethereum, Bitcoin, Dogecoin, and others are cryptic.
There are two ways in which to accumulate these currencies. Mining creates new blocks for the existing chain with computer equipment solving code, while purchasing is acquiring the codes for preexisting blocks.
Each block has an identifier and is unique. Buying and trading is done on exchanges but to have the key, transfer off of the exchange is required, say to a digital wallet. Wallet software stores a private key, but the currency asset is still stored on the chain. The block chain is security in that it serves as a public ledger. Investors can see trades in real time, what is being traded and how much exists. This is visible to everyone, but the identity of the owner is anonymous.
One of the major issues concerning investments in cryptocurrency is the lack of set value. Luis Interiano, a reference librarian at West Baton Rouge Library has been reading up on cryptocurrency to stay informed for patrons and says, “It’s an agreement, a string of code or electronic bits that exist in a computer.” For some types, the value is agreed upon by investors and not based on any tangible resource unlike a company value in stocks or commodity value. Still, it has been a popular route for investors. One risk for investors is outlined by Interiano’s observation, “Once people start doubting it, it loses its value.”
A major concern from the public is the volatility of the value of Bitcoin and other cryptocurrencies. Plus, trading cryptocurrency differs from markers such as the NYSE in that trading never closes.
Another censure both from governments and people is the use of these platforms to launder money without detection, as the currencies are not regulated by any government entity. To understand what other concerns or benefits are or could be, the basis for which Bitcoin was created must be understood.
The film, Cryptopia was reviewed by Liquid Crypto Blog as one of the most accurate films on the subject. In the documentary, Torsten Hoffmann, one of the two directors, interviews the major players in today’s cryptocurrency technology.
While there is truth to the criticism of black market use, it is only taking advantage of the crypto ideals which include decentralizing governance, instantaneous worldwide transfers at any time, and privacy.
The room for misuse in such a currency is one side of the coin while the flip side gives an advantage in financial security for people under the control of unjust governments or who live in a country with unstable currency.
Bitcoin is programmed to be a fixed supply. At the time Cryptopia was made (2020) there were about 18 million Bitcoin mined. The cap is 21 million Bitcoin. The fixed number of possible units should in theory stabilize the digital asset. However, its ability to be used is still a crucial part of its value.
As stated in the film, one of the founding documents of this craze is the 2008 white paper written by Bitcoin creator Satoshi Nakamoto. However, it seems Satoshi Nakamoto is a pen name. No one knows the true identity of Satoshi Nakamoto. An anonymous founder, a perfect figure head to a decentralized currency.
The original nine-page white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” outlines the aims for Bitcoin. On page two of the document, it states, “We define an electronic coin as a chain of digital signatures.” The model for exchange is based on full disclosure via public ledger, “cryptographic proof” rather than the current system of exchange through banks or other financial institutions which act as a trusted party. The aim of Bitcoin, at least through the lens of Satoshi Nakamoto, was to create a currency which is not regulated by government or banks.
Since Bitcoin took off, many other cryptocurrencies were created and use similar technology. In the film, the directors give examples of some big business embracing block chain technology for tracking supply chains, testing use for communication between self-driving cars and manned drivers (BMW), and tokenizing items or services to eliminate middlemen.
The film points out the irony of big business harnessing this new technology, as the technology itself was created in part to decentralize control and create peer-to-peer trading.
No business in West Baton Rouge currently accepts Bitcoin directly. However, the Coinstar machine inside of Hubben’s Supermarket on North Alexander Ave. allows customers to buy Bitcoin. For this type of transaction, you must use cash (not coins), have a digital wallet set up with coinme.com which requires signing in with a government ID.
When the screen prompts the user to insert cash, the current Bitcoin exchange rate will be visible on the screen. The voucher code and phone number entered are used to transfer the Bitcoin into the digital wallet.
While the practical application of Bitcoin as a replacement currency isn’t a current reality in town, some other proposed real world uses of block chain technology make use of the unchangeable and traceable nature of transactions. N.F.T.s or “non-fungible tokens” can use the technology as it serves as “a unique digital identifier that cannot be copied, substituted or subdivided” per Merriam Webster.
CSNBC reported in March 2021 that Mark Cuban was considering changing ticketing for the Dallas Mavericks to N.F.T.s in the future. One draw to this technology is that the secondary market (ticket resales) of an N.F.T. could still be within the original seller’s profit margin and programmed in from the start. The unique identifier also makes forged tickets less likely.
The blockchain technology behind Bitcoin has many possibilities, but the currency isn’t widely accepted in retail and converting it to U.S. dollars is a taxable event.
The taxing of Bitcoin as property (asset) has made the use as a currency infeasible. In the film, crypto industry professionals are largely accepting the national limitations legislation can create upon the currency, but the system, which is open-source code stored all over the world holds a value in that it is a permanent record of transactions and ownership that cannot be altered or destroyed. The potential uses of this technology are still unfolding.