LibGuides: Blockchain and Cryptocurrency: Cryptocurrency

Definition

What Is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

KEY TAKEAWAYS

A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
Experts believe that blockchain and related technology will disrupt many industries, including finance and law.
The advantages of cryptocurrencies include cheaper and faster money transfers and decentralized systems that do not collapse at a single point of failure.
The disadvantages of cryptocurrencies include their price volatility, high energy consumption for mining activities, and use in criminal activities.

References
Frankenfield, J. (2022, January11). Cryptocurrency. Investopedia.
https://www.investopedia.com/terms/c/cryptocurrency.asp

What Is Cryptocurrency?

A cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Unlike the U.S. Dollar or the Euro, there is no central authority that manages and maintains the value of a cryptocurrency. Instead, these tasks are broadly distributed among a cryptocurrency’s users via the internet.

You can use crypto to buy regular goods and services, although most people invest in cryptocurrencies as they would in other assets, like stocks or precious metals. While cryptocurrency is a novel and exciting asset class, purchasing it can be risky as you must take on a fair amount of research to fully understand how each system works.

Bitcoin was the first cryptocurrency, first outlined in principle by Satoshi Nakamoto in a 2008 paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Nakamoto described the project as “an electronic payment system based on cryptographic proof instead of trust.”

That cryptographic proof comes in the form of transactions that are verified and recorded on a blockchain.

References
Ashford, K. & Schmidt, J. (2022, January 5). What Is Cryptocurrency? Forbes.
https://www.forbes.com/advisor/investing/what-is-cryptocurrency/

Opposing Viewpoint in Context

Digital Currency - Opposing Viewpoints in Context
Digital currencies are Internet-based currencies that do not require physical banknotes or coins. Unlike traditional currency, which is backed by a government treasury, digital currencies can be decentralized, meaning their value is not backed by any single institution or government entity. Digital currencies first began to appear in the 1990s, and later innovations in digital cryptography in the twenty-first century gave rise to cryptocurrencies such as Bitcoin, Ethereum, and Ripple. Cryptocurrencies are decentralized forms of digital currency that allow peer-to-peer transactions and keep a permanent record of all transactions for which the unit of currency is used.

CQ Researcher

Digital currency
Financial transactions increasingly are taking place outside the traditional government-backed currency system via a variety of so-called digital currencies or cryptocurrencies. The best known of these, bitcoin, is accepted by a growing number of businesses large and small, with more than 2 million transactions last month. For people with a strong libertarian bent, the involvement of governments in currency is cause for alarm. To them, digital currency is a way to achieve greater freedom. For other users, protecting privacy and avoiding the costs of the traditional monetary system, such as paying fees to credit card companies, make digital currencies attractive. But these currencies also are proving risky — their values are volatile, and some parts of the system are vulnerable to hackers. Moreover, law enforcement officials say digital currency provides criminals a way to hide the proceeds of their illegal activities. International, federal and state regulators are studying these new currencies to determine how to address the issues they pose.
The future of cash
While cash continues to circulate widely in the United States, many consumers, as well as many business experts, believe paper money will soon become antiquated. Advocates of a cashless society point to countries such as Sweden and to some Chinese cities where mobile payment applications are supplanting paper currency. In the United States, digital payment systems are helping to change consumer habits, and some businesses have stopped accepting cash. Advocates of a cashless society argue that credit and debit cards and digital payment methods are efficient and transparent and inhibit financial crimes. Because cash is anonymous and largely untraceable, it can facilitate illicit activities such as tax evasion and money laundering. Critics of the cashless trend raise concerns regarding privacy, security and equality. They argue that cash lacks the fees associated with cards or electronic money transfers and that cashless businesses discriminate against people who must, or choose to, rely on cash. In the face of this criticism, some businesses that went cashless are reversing course.
The Future of Cryptocurrency
The November bankruptcy of cryptocurrency exchange FTX capped a volatile year of selloffs and chaos in the crypto market. This accelerated congressional efforts to create an oversight framework for the largely unregulated and highly unstable digital assets such as bitcoin. Crypto industry supporters, including many GOP members of Congress, view digital assets and their underlying blockchain technology as revolutionary, even as critics deride these assets as a massive Ponzi scheme and blockchains as impractical and environmentally hazardous. At stake is the future of an industry that has become a magnet for cybercrime, but that White House officials believe could bolster U.S. leadership in global finance. Meanwhile, the Biden administration is testing the concept of a government-backed digital currency that could accomplish some of the same goals cryptocurrencies sought to achieve, such as faster, cheaper international payments and giving unbanked consumers access to the financial system.
Hidden Money
Tax evasion and money laundering are generating major headaches and revenue losses for governments across the globe. In this shadow economy, wealthy investors and others use offshore tax havens and shell companies to hide money and avoid tax collectors. Drug cartels and other criminals, meanwhile, launder money by buying real estate or putting illicit gains in legitimate businesses. According to one estimate, the amount of hidden money worldwide tops $10 trillion. In response, experts are urging more cooperation among governments. The United States is seeking to collect more information on the overseas financial accounts of U.S. citizens, and other nations want Washington to share more data about their citizens' accounts in U.S. banks. But the Trump administration opposes a proposal that would require multinational companies to disclose their earnings in each country and pay a global minimum tax. And with U.S. states competing to attract businesses, the United States has become one of the largest tax havens in the world.
Dark Money
The Supreme Court's 2010 decision in Citizens United v. Federal Election Commission legalized unlimited secret donations to political campaigns. Thirteen years later, this so-called “dark money” has become a normal part of U.S. elections, with both parties raising tens of millions in anonymous funds each election cycle. During the 2022 midterms, four dark money groups aligned with Republican or Democratic congressional leaders poured more than $295 million into federal campaigns. Proponents say such large, undisclosed donations protect political donors’ freedom of speech, but critics argue these contributions have enabled the super-wealthy to secretly control U.S. politics. They also warn that it has fostered political corruption, enabled malicious attack ads and provided a gateway for foreign entities to influence American politicians. While polls show U.S. voters overwhelmingly oppose dark money and are dissatisfied with the current campaign finance system, major political, legal and administrative obstacles prevent reform at the federal level. Nevertheless, reformers say, officials are beginning to check the influence of dark money at the state and local levels.
The Federal Reserve
The Federal Reserve, America's central bank, plays an important role in protecting and stabilizing the U.S. economy by controlling inflation, limiting unemployment and regulating financial institutions. In response to the business shutdowns resulting from the COVID-19 pandemic, the Fed undertook a host of aggressive actions to stimulate the economy, including reducing its benchmark interest rate to near zero, establishing massive emergency lending programs and buying large amounts of bonds and other assets. But the economy has revived this year and prices are rising as consumers begin spending again and businesses expand. The Fed now faces questions about whether it has waited too long to control inflation by pulling back on its stimulus measures. Critics have also challenged the Fed's recent foray into social justice and environmental questions. And there is an ongoing debate among economic experts and policymakers about the degree to which the Fed should be insulated from pressure by political leaders as it sets its policies.

Blockchain and Cryptocurrency

Definition

What Is Cryptocurrency?

KEY TAKEAWAYS

What Is Cryptocurrency?

Opposing Viewpoint in Context

CQ Researcher

Total Value of all Cryptocurrency - May 2024