BusinessThe Future of Blockchain and Cryptocurrencies

Innovation and greed are the two things that have changed the world. Countless inventions have come about because either there was a need or the inventor was just plain greedy for money. However, in rare circumstances, these two can combine together to create an entirely new product. Cryptocurrencies are one of them. The price of Bitcoin, the most famous cryptocurrency, increased in valuation from about $900 in December 2016 to near $20,000 just a year...
Samuel ShihNovember 29, 2018

Innovation and greed are the two things that have changed the world. Countless inventions have come about because either there was a need or the inventor was just plain greedy for money. However, in rare circumstances, these two can combine together to create an entirely new product. Cryptocurrencies are one of them. The price of Bitcoin, the most famous cryptocurrency, increased in valuation from about $900 in December 2016 to near $20,000 just a year later. However, valuations have fallen to $7,000 after fears of its volatility have risen up. It’s not the only one as the valuations of other cryptocurrencies, which followed it on the way up, have collapsed, too. To be quite frank, no one knows where prices will go for any type of product but it is particularly hard with cryptocurrencies because there is no agreeable or rational way to reach any particular valuation.

Bitcoin, the first and most popular cryptocurrency, was started as an online version of cash and provide a way for people to exchange money without the possibility of interference from governments or banks. However, more than 10 years later, it has deviated from its original path. Barely any vendors use it, the security on accounts are poor, and it simply isn’t user-friendly. Partly because it has so few uses and partly it is so unregulated, cryptocurrencies have instead become a focus for speculation, a gambling game. Some people have made fortunes as cryptocurrency valuations have rocketed up while many early users have simply cashed out with a significant loss.

According to various economists, a currency is something that can be used as a medium of exchange, a store of value, and a unit of account. Lack of widespread usage and high volatility means that cryptocurrencies can, at least for the present, cannot satisfy any of those uses. That does not mean they are going to go away. As things stand, the most likely future for cryptocurrencies is remaining as a volatile casino that no one takes seriously.

But is the future of a world built entirely on online transactions possible? Can blockchains—the technological basis of cryptocurrencies—do better? Blockchains are like a database controlled by the users themselves rather than some unknown corporate entity and one where entries are permanent and unerasable. Blockchain activists believe that features such as these can not only fill the flaws that previous cryptocurrencies have but can even do things such as charging electric cars to proving ownership of a property to registering copyrights for music and to even providing authentication of shoes.

These activists claim that even if things do turn south, consumers only lose blockchains and not money. Many of these claims are made by cryptocurrency speculators, who hope that creating hype and excitement around value and usage of blockchains will boost the value of cryptocurrency. However, the reality is that a large majority of companies that use blockchains end up just ignoring or throwing out many of the features that make them useful and distinctive. Not to mention continuously shuttling data between users makes blockchains slower than conventional databases.

As a result of these limitations being known, the excitement around this new technology is quickly declining. A few companies, such as SWIFT, a bank-payment network, and Stripe, an online-payments company, have abandoned projects that focused heavily on blockchains, with the mindset that the costs of developing such technology outweigh the benefits.

However, what you shouldn’t take away from this is that a blockchain future is irrelevant and impossible. Just because blockchains have been overhyped does not mean they are useless. Their ability to bind their users into an agreed way of working may prove helpful in areas where there are no decentralized sectors, such as international trade. They are no panacea against the usual dangers of large technology projects: cost, complexity and overcooked expectations but they certainly can get close to being one.

Samuel Shih

Samuel Shih is a Contributor at Youth Business Collective, the Founder and President of Reason for Debate and an Ayala Fellow at the UCI Ethics Center.

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