Do We Really Need Cryptocurrency?

For many outside the cryptocurrency sphere, Bitcoin is a familiar word and may, for some, be the extent of their crypto awareness.

As the largest crypto, Bitcoin has become a shorthand for the entire industry to the uninitiated, leading some to describe the age of DeFi as the 'Bitcoin era'.

There's no question that BTC opened the doors to the proliferation of digital assets.

The arrival of Satoshi Nakamoto’s cryptography whitepaper marked the start of the so-called Bitcoin era. Since then, cryptocurrency has become a hot topic, attracting enthusiasts and sceptics in large numbers.

Supporters believe crypto frees us from the shackles of ‘centralised’ finance, offering a decentralised, secure, and efficient alternative to traditional systems.

But is that true? As we assess the importance of the Bitcoin era, it’s important to ask if cryptocurrency is genuinely needed or just a tech fad that cannot deliver its lofty promises.

The Promise of the Bitcoin Era?

Proponents of cryptocurrency make a lot of strong statements about the benefits it offers society. But do they stack up, or do the downsides mean crypto will never move to widespread adoption?

Financial Inclusion: One of the key arguments of the Bitcoin era in favour of cryptocurrency is its potential to give inclusion to the unbanked and underbanked populations around the world. By leveraging blockchain technology, cryptocurrencies can facilitate cross-border transactions and enable individuals who cannot access ‘traditional’ banking services to be included in the global economy. However, the reality is that the adoption and infrastructure required for widespread cryptocurrency use may be limited in areas with inadequate internet connectivity or technological literacy, thus hindering the promised financial inclusion.

Volatility and Stability: Cryptocurrencies have garnered a reputation for extreme volatility, with significant price fluctuations that can occur within minutes. This has been a constant of the Bitcoin era and poses challenges for those seeking stability and predictability in their financial transactions. The absence of a central authority regulating cryptocurrencies further adds to the uncertainty. While proponents argue that decentralised systems eliminate the risk of government interference and manipulation, the absence of regulation also exposes users to potential fraud, scams, and market manipulation.

Scalability and Efficiency: Supporters often tout the efficiency and speed of cryptocurrency transactions, claiming that they can revolutionise the traditional financial system. However, the current infrastructure of major cryptocurrencies like Bitcoin and Ethereum has struggled to handle large transaction volumes, leading to network congestion and increased fees. Scalability remains a significant hurdle, preventing widespread adoption and raising questions about the feasibility of cryptocurrencies as a primary means of transaction.

Environmental Concerns: The ecological impact of cryptocurrency mining and energy consumption cannot be ignored. The energy-intensive process of mining cryptocurrencies, particularly Bitcoin, has raised concerns about its carbon footprint and contribution to climate change. As the world grapples with the urgent need to transition to sustainable practices, the environmental impact of cryptocurrencies becomes an important consideration.

Trust and Security: Cryptocurrencies promise enhanced security through cryptographic algorithms, but the complex and evolving nature of the technology poses risks. However, the Bitcoin era has been defined by hacks, thefts, and the loss of private keys, resulting in significant financial losses. Moreover, the anonymous nature of many cryptocurrencies has made them attractive for illicit activities such as money laundering and ransomware attacks, further eroding trust and confidence in the technology.

Beyond Bitcoin

From my, admittedly critical, assessment, it appears the practicality and necessity of cryptocurrencies remain subject to debate.

To a point, this is true. The challenges of financial inclusion, volatility, scalability, environmental concerns, and security cannot be ignored.

However, I am convinced that with innovation, investment, reasonable, enforceable regulation, and the input of good actors, cryptocurrency has a significant role in the globe’s financial future.

I firmly believe it is the future of finance, and I am evangelical about cryptocurrency. Despite that, I am not beyond scepticism; as the landscape continues to evolve, it is healthy to approach cryptocurrency with a critical mindset, considering its potential benefits and limitations.

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Brendan Beeken FInstSMM is an Entrepreneur, Commercial Strategist, Investor, Philanthropist and the Founder and Chairman of cryptocurrency community Moni Talks. By sharing his business journey, both the successes and failures, and his personal values and vision, he hopes to inspire and assist fellow businesspeople and budding entrepreneurs. Find out more at brendanbeeken.com