The failure of Sam Bankman-FTX Fried’s last week has once again sent the price of cryptocurrencies tumbling
It has been talked about a lot in the news about the risks of being a part of the new way money is being made.
What does the future hold for something that is as ephemeral as cryptocurrencies, which are difficult to govern and fraught with risk? Anyone who claims that they are aware of the answer to that question is being dishonest. In reality, cryptocurrencies are an attempt to redefine the concept of money, with all of the difficulties and resistance that this entails, to bring it into the digital era; to reinvent money so that it no longer depends on what governments and central banks want to do, but rather on an algorithm.
Concept of money in the digital age
Why should we have to accept that a government can issue as much currency as it sees fit, and why should we have to accept that inflation, which destroys the value of the money we have previously obtained, is a natural phenomenon? In principle, the idea is sound: why should we have to accept that a government can issue as much currency as it sees fit?
Or, to put it another way, why is it that certain countries, like the United States during the epidemic, are able to print almost as much money as they choose, but other governments cannot do the same without running the danger of the value of their currency plummeting dramatically? To put it more bluntly, if it reads “in God we trust” on the dollar, what good does it do us to place our faith in God or in the government for something as trivial as this? Putting our reliance on mathematics rather than other things seems like it would be beneficial and, most importantly, more predictable.
Without a shadow of a doubt, cryptocurrencies will serve as the dominant form of exchange in the years to come. When a piece of technology has the potential to achieve so much, widespread implementation of it is simply a matter of time. People will trust cryptocurrencies more in the not-too-distant future than they will trust the money issued by their government, for the simple reason that cryptocurrencies remove the influence of politics and other arbitrary variables from the equation.
What exactly is the value of a cryptocurrency?
It all boils down to the number of individuals who are committed to making use of it. What should we believe, therefore, when we notice the changes in the price of bitcoin or ether in comparison to the dollar or the euro? Speculation? There will, of course, be speculators because there are always speculators where there is money to be made, and there will even be idiots who go into debt to acquire things that are inherently dangerous.
This is because there are always speculators where there is money to be made. There will even be irresponsible individuals who create card castles and ruin value for many naive people, but in the end, what we are experiencing is a process of finding the worth of an asset, which is neither more nor less than what we are experiencing right now.
When we have a better idea of how many people use cryptocurrencies on a regular basis, we will begin to assign a price to them that is proportional to the total amount of transactions that will be carried out using cryptocurrencies. At this point, all we are doing is doing research and gauging how many individuals have an understanding of the idea as well as the value proposition.
Given how easy it is to create a cryptocurrency, it begs the question: which cryptocurrencies will hold up over the long term? The example of bitcoin, a pioneer that has been around for some time, that has already issued more than 90 percent of the total amount that is to be issued, and that has many followers, is an interesting one: it is a practically fossilized currency
Its rules were written little less than in stone by that unknown Satoshi Nakamoto, and practically do not change because it is extremely difficult to obtain consensus in order to change them in the absence of a decision maker.
Then there is Ethereum
Ethereum is a kind of cryptocurrency developed by Vitalik Buterin and used by a significant number of individuals. It is also open source, it allows for many more use cases than bitcoin does, and it includes rules that change to adapt to the circumstance. For example, does it use an excessive amount of energy and release an excessive quantity of carbon dioxide? We make adjustments to it as we go along, making it easier to understand and less expensive, and we even contemplate the prospect of paying for all of the carbon footprints it caused in the past.
Why do we need a mechanism for such exchanges to verify that they are solvent and have reserves if a gang of thieves is responsible for sending them into bankruptcy in the first place? We come up with the idea, we create it, we put it through its paces, and that’s it. A dynamic viewpoint that is guided by some of the most intelligent thinkers of our day and that is always adapting, shifting when it is necessary to do so, and offering answers to issues that arise.
It’s possible that you haven’t heard about The Merge, yet it has the potential to completely transform our world. Ethereum is currently the second most valuable cryptocurrency in the world.
There are many different cryptocurrencies out there, some of which are intriguing and others of which are a joke; nonetheless, they all have the same issue, which is that very few people utilize them. And since the value of a cryptocurrency is heavily dependent on the number of people using it, we will see the failure of a great number of fascinating or appealing value propositions throughout the course of time.
It is entirely up to you whether you want to put your money into something that, in all likelihood, will not achieve widespread acceptance, or if you want to put your money into a cryptocurrency that was developed only as a joke. But keep in mind that your results may differ from mine.
Is it smart to put money into virtual currencies like bitcoin and Ethereum? At this point in time, the most intriguing aspect of investing any money, even if it is only a tiny amount, into cryptocurrencies is to discover how they operate. This is true even if the quantity invested is quite low.
Take twenty dollars, buy some 0.00083ETH or 0.000060BTC in a well-known exchange such as Coinbase or Binance, transfer them to a wallet as quickly as possible to understand how the process works, and enter into the dynamics of the blockchain, which will soon be everywhere: the so-called Web3 will almost certainly work by incorporating the blockchain into practically all processes, which will give those who have some idea of how it works, in principle, a certain advantage.
In other words, take twenty dollars, Above all else, keep in mind the golden rule: “not your keys, not your money.” This is why it is preferable, even if it may seem riskier, to handle your own funds in your wallet as opposed to leaving them in a centralized location where other people can access them.
What is the number one guideline for using cryptocurrencies? It’s neither your cash nor your keys…
It is completely natural for there to be some level of uncertainty about technological developments since these changes are complicated processes.
Do not let current scandals or future scandals deter you. They imply nothing more than the fact that dishonest people may be found wherever since dishonesty is inherent in (at least some) people. The future will include the use of blockchain technology everywhere and in every aspect of business, and the sooner we can get our brains around this concept, the better it will be for everyone.
Let’s assess the situation carefully and take precautions, but we shouldn’t be scared to have fun since that’s how we get new skills. And in a lot of respects, our future is going to rely on what we learn.