Decoding Cryptocurrency: Understanding Bitcoin and Digital Transactions
Cryptic currency Making sense of bitcoin and other digital exchange
Bitcoin is the most popular means of digital exchange, and it came into being in the midst of the financial meltdown of 2008.
The human mind has conquered diseases and blasted men into space, but there are some things that are still tough to wrap your brain around. Nuclear physics. Astrophysics. The intricate workings of artificial intelligence.
And, for many people, cryptocurrency. The term cryptocurrency is rushed by us in news reports, along with related terms like bitcoin and blockchain, but unless you are engrossed in the tech world or a libertarian die-hard, it can all seem a little baffling.
So, what exactly is cryptocurrency? “It’s ways for people to cooperate to accomplish a goal,” is the way Paul Balzano put it in October at a panel discussion on cryptocurrency sponsored by the Washington County Chamber of Commerce. Balzano, a staff member for the U.S. House Committee on Agriculture and an expert on cryptocurrency, added that it “provides a way for people to cooperate without a bank.”
At its most basic, cryptocurrency is a means of exchange untethered from any sort of central authority that determines its value, such as a bank or, in the case of the United States, the Federal Reserve. Bought and sold digitally, its value is determined by its users, of whom there are more than 90 million, according to estimates. Bitcoin is the most popular means of digital exchange, and it came into being in the midst of the financial meltdown of 2008. Satishi Nakamoto, one of its creators, said then that “I’ve been working on a new electronic cash system that’s fully peer-to-peer with no trusted third party.” Since the birth of bitcoin, a host of digital currencies has followed – more than 13,000, in fact, though it’s estimated that a little over 8,000 of them are active. “No one is in charge of bitcoin,” Balzano said. A single unit of bitcoin is now worth close to $100,000.
Matthew Martin, a Houston technology consultant, has been dealing with and investing in cryptocurrency for the last 10 years, and explained that “there is nothing tangible in the world it is attached to.” It’s believed that the election of Donald Trump for another term in the White House will strengthen cryptocurrencies and allow for more favorable regulation. According to a Washington Post article this week, “normies” have decided they want to be part of the cryptocurrency land rush, and believe the incoming administration will look more favorably on digital assets than the outgoing Biden administration. Trump himself has vowed to make the United States the “crypto capital” of the world, which could include banks offering cryptocurrency and other related services. This would mark a turnaround for Trump, who had previously denounced cryptocurrency as being “based on thin air.”
At the Washington County Chamber’s discussion in October, Charles Kiser, the founder of Matewan Digital Holdings in West Virginia, said, “This election year is really when cryptocurrency has become part of the discussion for the first time.” Martin has invested in Dogecoin, another cryptocurrency. Dogecoin was launched by two software engineers who were actually having fun with it amid the cryptocurrency frenzy. Its coins have the face of Kabuso, a Japanese dog, on them, and even though Dogecoin was meant to satirize cryptocurrency, it has become an investment vehicle that was trading for 40 cents a share on the New York Stock Exchange on Friday morning, Martin put $500 into Dogecoin in 2020, and his investment peaked at $7,000, and it has settled back to $3,500, he said. “It comes up and goes down,” Martin said. “There are definitely ways to grow generational wealth with this stuff. But it is risky.”
Cryptocurrency advocates like Kiser believe an alternative means of exchange will improve longstanding systems of banking and finance, in the same way that competition from private services like Federal Express and United Parcel Service led the U.S. Postal Service to upgrade its overnight delivery services. But cryptocurrency also has an array of skeptics and critics who look on it with a wary eye. They point to cryptocurrency as being an avenue to hide illicit transactions and nefarious activities, such as selling drugs, financing terror groups or laundering money. Scams and scandals have abounded, with the most notorious being the arrest and conviction of cryptocurrency trader Sam Bankman-Fried, who is now serving a 25-year prison sentence for money laundering and wire, commodities and securities fraud. Before Bankman-Fried’s downfall, he rubbed shoulders with the likes of Bill Clinton, Leonardo DiCaprio and Taylor Swift. This week, on the website for The Atlantic magazine, staff writer Annie Lowrey described cryptocurrency as being one of the “three pillars of the bro-economy,” alongside sports betting and day-trading. She described all three of them as being part of
