Crypto’s fall: Easy money, or definite loss?
The modern means of money have been through centuries of evolution. Despite all the advantages that online banking brought to our lives, cash money continues to be the main attribute of trading, especially in smaller communities. Nowadays, since cryptocurrencies are eligible to all regardless of their background, there are huge numbers of people who're seeking hope in it. And the reason behind this is crypto’s simple and almost effortless nature.
The very first piece of crypto - Bitcoin was introduced for the first time in 2008 as an online transaction tool, where all third parties (such as banks and other financial institutions) were exempted from the process of electronic payment. That, of course, demands meditating, as it’s trust-based, so no official sides would intervene if something goes wrong. And the main feature is the limited number of Bitcoin, so increasing demand over time would boost the value. It really did.
In the open system of transactions everyone can validate and see others' transactions without help from government institutions, but this validation process, which we call “mining” takes a lot of time, special equipment such as a graphics processing unit in computers and of course a lot of electricity. There are lots of huge companies whore devoting themselves to validating transactions, and every time they succeed, they’re rewarded with newly created Bitcoin, which costs a lot. Technically, they’ve been rewarded for completing blocks of validation by solving some equations generated from the transaction process – which was essentially made to make transactions easier and smooth. It’s a system that keeps itself working, once there was a Bitcoin bought with real money maybe, then somebody send it to you, there was also a need for a person to verify what you’re doing is correct, and then you earned money and the one who validated the process earned a Bitcoin…After all these hours and days of work, where is the value? All you have is numbers and lost time and some digital currency that won’t even work in most places unless there is a chance to turn it into real money.
As its predecessors, the newly launched currency system maintains “yield markets” (also known as Decentralized Finance - De-Fi, which often shows up as “saving wallets” or “interest accounts” – syncing with usual bank accounts or deposits. Companies are lending out digital “cash” for their customers with high-interest rates ranging from about 7 to 12 percent, and unsafe, unlike regular banks, there can be faulty protocols, hacking and market swings like the current one, which happened after the Russian invasion of Ukraine.
To some, cryptos have become an inseparable part of their lives, and it’s not for no reason. With traditional currencies, it's not entirely up to you to use your money however you want - it comes with its limits, even though you haven't experienced it yet. It's possible that your bank would report to your government if you're sending a big number of grands overseas. This was what happened in Russia - people who were accepting or sending money with dollars were hunted down and this led most of them to use crypto transactions.
But this is all "could-be-considered as a good side" of these alternative currencies. One might also suggest that it is eco-friendly, since you don’t have to print anything, and no resources would be wasted. But, with climate change and global warming and other catastrophes on the doorstep, “mining” cryptos is causing energy crises. To compare, World’s biggest search engine Google consumes only 12T Watt-hour (Wh), which is about a 12th of Bitcoin’s energy use. The carbon footprint that Bitcoin is leaving us is not the kind that can be cleaned easily.
What is more, the number of people who’re playing crypto games increasing day by day, without even knowing it? Different cryptos pop up every day, whilst one twit can change the whole course for no other specific reason. With no value created, cryptocurrencies are a lost cause and nothing except a guessing game, despite all the important people who’re taking it very seriously.
Think about the creation of monetary units – which emerged from a serious demand when bartering wasn’t helpful anymore, a unique form of exchange was introduced. The reason why pieces of paper have a lot more worth than their production cost is that it represents value. The rarer the item is, or the more hours and effort spent on it, the more money it costs. Does this case apply to cryptos? One dog meme can get worthy without creating any value in several weeks. Recent developments in blockchains showed that it’s nothing but gambling, a “negative-sum” game. Why do people keep relying on it then? Who knows, with developing industries and economies, people are in the search of something new, maybe that can be it.