It seems as if everything has moved online, and money is no exception. Will paper money become obsolete as we fully immerse into a digital monetary world? Not so fast. Cryptocurrency may have a few flashing lights up ahead to consider before you dive in headfirst.
Digital Money Isn’t Necessarily Easier
First thing is first. Cryptocurrency is a form of encrypted digital money that is traded from person to person. While it sounds extremely convenient, recent headlines pose a cautionary disclaimer.
In the Entrepreneur article “How to Protect Your Cryptocurrency Holdings,” Rose Leadem shares a statistic with readers: “As of August 2017, more than $225 million worth of cryptocurrency was stolen, according to research compiled by CryptoGo, a cryptocurrency exchange.” This article further states that the total amount of stolen Bitcoin was valued at $3 million in 2013, and jumped to $95 million in 2016. “Stealing” cryptocurrency is achieved through hacks, software exploitation, and phishing. To help combat this, people can arm themselves with various protection strategies like ample research into the types of cryptocurrency before investing, understanding exchange and storage methods, and relying on various antivirus software and multi-factor authentication platforms. However, even armed with protection, experts still appear wary about this industry, as seen in The New York Times article “Is There a Cryptocurrency Bubble? Just Ask Doge,” by Kevin Roose.
This article first introduces Jackson Palmer, the creator of Dogecoin, who introduced this cryptocurrency platform (a combination of Bitcoin and a Doge meme he saw online) as a bit of a joke to “show the absurdity of wagering huge sums of money on unstable ventures.” This “joke” transformed into investors buying into the premise and bringing its value to almost $400 million and encountering many scammers and hackers in this journey, leaving many original backers with almost nothing.
The “scamming” culture of cryptocurrency is prominent, even though this industry continues to grow. The article states that in addition to an abundance of “crypto-millionaires,” there are now hundreds of other digital currencies called altcoins and a new culture of start-ups that take advantage of the blockchain, also known as cryptocurrency’s public ledger system. In these cryptocurrency start-ups, money is raised through I.C.O.s (initial coin offering), where people receive virtual “tokens” instead of traditional things like stock. Once money is raised in the I.C.O., investors can use their tokens to access the soon-to-built products and/or services. The variables here are (by nature) unclear and unpredictable, but this article demonstrates the demand of this industry with the stat that “there have been 140 coin offerings in 2017 that have raised a total of $2.1 billion from investors, according to Coinschedule.”
Many experts point to the risk of cryptocurrency, especially in a cybercrime culture and the fact that I.C.O.s are largely unregulated in the United States. The Securities and Exchange Commission has gone on record to warn investors about new coin offerings, advising, “Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams.”
This article, specifically Jackson Palmer, also hints at worries of a possible “dot com burst” with many of these new entities failing, but also concedes that I.C.O.s can be the catalyst to “the creation of new and exciting enterprises.”
Where Are You Putting Your Money?
What do you think about this cryptocurrency industry? Is it good for new business (especially start ups that need a quick launch) or is it a potential disaster waiting to happen? We’d love to hear your thoughts on this interesting topic and get a discussion going!
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