Cryptocurrency : Another failed currency?

Cryptocurrency is a form of currency similar to any currency we use in our

daily lives. However, it is entirely digital having no physical form. This

currency has a mutable value and can be used in stores, online payments

or wherever the currency is accepted. Now, for example, I want to buy a

car and I have insufficient money, however I do have 4 Ethereums. Now I

visit the car dealer and pay him the cryptocurrency through a third-party

exchange. To store the information of this transaction, an advanced

technology known as blockchain is used. This technology is imperative

because it stores all the information of an account and ensures the

balance and transactions are not tampered with.




Why do the prices of cryptocurrency rise and fall?

The rise and fall in the prices usually occur because of supply and

demand, here supply is the number of currencies available and demand is

how many people wish to buy the currency. For example, the price of a

bitcoin is very high and most of the holders want to sell the currency for a

greater price than they bought it for. Since, here the supply is more than

that of the demand, the price will need to decrease to balance the supply

and the demand. Thus, government can play a very pernicious role here.

The banning of cryptocurrency in major countries can leave the

currencies in scrambles.


Mining and why it is bad for the environment


In simple words, mining cryptocurrencies is nothing but generating new

currencies by solving certain computational puzzles and equations.

Mining maintains the records of the transactions and is vital for

cryptocurrency since it perpetuates the blockchain technology. In turn, a

miner is rewarded in the form of cryptocurrencies. If a person can not

afford a bitcoin, they can consider mining. However, to mine, you require

tremendous amounts of energy, approximately 72 terawatts of energy to

mine one bitcoin, which could leave adverse impacts on the environment.

A Cambridge study suggests that cryptocurrency mining is a top 30 energy

consumer, if it were a country. Moreover, studies claim that Bitcoin

stands a significant chance to single-handedly drive global warming,

producing enough carbon-dioxide emissions to push the global

temperature "above 2°C within less than three decades." Elon Musk was

crestfallen with the rapid increase in the use of fossil fuels for Bitcoin

mining and transactions, especially coal, which has the worst emission of

fuels. Elon Musk decided not to accept bitcoin as a mode of payment for

his Tesla cars. Every transaction executed; a small amount of energy is

consumed by a computer. To switch from a non-renewable energy

provider to a renewable energy provider is not an easy task and won’t be

implemented soon.




Why Cryptocurrency will fail

Cryptocurrency can be considered a rebel organization inclined to

overthrow the government’s control over the economy. Cryptocurrency

tends to replace the fiat currencies (Currencies issued by the

government) and desires to be the standard currency used by everyone.

Cryptocurrency’s have the potential to destabilize or undermine the

authority of the central banks (RBI in India) Bitcoin claimed to be a


decentralized peer-to-peer payment network that is powered by its users

with no central authority or middlemen. This lack of central authority is

the primary reason governments are afraid of cryptocurrency. The

government are worried that cryptocurrency can be used to circumvent

capital controls, can be used for money laundering or illegal purchases,

and could be risky to investors. The government don’t have control over

cryptocurrency and they are timorous that they will form ties with

felonious firms and use their platform for illegal transactions. The

government fear they will lose absolute control over the economy.

Governments control fiat currencies. They use central banks to issue or

destroy money out of thin air, using what is known as monetary policy to

exert economic influence. They also dictate how fiat currencies can be

transferred, enabling them to track currency movement, dictate who

profits from that movement, collect taxes on it, and trace criminal

activity. All of this control is lost when non-government bodies create

their own currencies. This trepidation will force the government to ban

the trading of cryptocurrency without further ado. This action would be

inevitable and will cause the decline of cryptocurrency.


Should you take the gamble with cryptocurrency?

Absolutely not! Cryptocurrency has no physical embodiment and no

assets; it is a non-existent currency in the real word with no backup

support. The value of the cryptocurrency is erratic. For example, a

government ban on cryptocurrency by any affluent country can leave the

currency in crumbles. Bitcoin experienced catastrophe after the ban on

cryptocurrency by China. The entire platform of cryptocurrency is

dependent on Blockchain Technology, and this technology is vulnerable

to hacking and if hacked, all the capital invested might be seized. Hefty

growths entice people to invest and then take a risky burden. You can

either double your money or lose it all, which is a poor decision making.

Debt funds and Mutual funds are safer options, in times of financial

hardship.


Conclusion: -

From a personal viewpoint, I do not see a future for cryptocurrency

simply because of the government’s power and authority. They will soon

realize that they are being overthrown by this rebel organization.

Philanthropist Elon Musk one of the most renowned entrepreneurs is

gradually withdrawing from this currency and millions will follow him.

Cryptocurrency may persevere in the next few years but will not be a

stand-out performer.



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