Originating in idealist anarcho-capitalist and libertarian communities with a vision of a cyber-utopia free from government and corporate controls, cryptocurrencies have since descended into a dystopian wild west status: they now flourish amongst speculation, scams, hacks and spectacular market crashes.
Despite high-profile proponents, notably Elon Musk, investing in crypto has always been risky, and the last eighteen months have been a rollercoster ride for investors. Last year, FTX, one of the big three cryptocurrency exchanges, dramatically collapsed taking at least $1 billion of customer funds with it.
volatility
While they might seem fun, some catchy additions to the crypto roster are highly risky investments: shitcoins are cryptocurrencies with no utility or purpose that typically have very short lifespans; memecoins refers to a whole range of cryptocurrencies derived from internet memes. Again, they offer little or no intrinsic value, and are notoriously volatile.
Such scandals have made many investors drop out of the cryptomarket, causing the price of one Bitcoin to plummet 75 per cent: from the record high $68,000 in November of 2021 to below $17,000 at the time of writing.
a new Era or speculation?
Despite their volatility, many still believe in the potential of cryptocurrencies and blockchain technology to spark a new era of economic freedom and growth. To find out more, Speak Up met with Robert Learney, head of technology in distributed systems at Digital Catapult, a UK-based organisation specialised in advanced digital technology. Learney heads a team that looks for ways in which distributed systems technologies — such as blockchains, distributed file systems and advanced cryptography — can be used to improve the way traditional companies function and operate. He began by giving us an update on crypto.
Robert Learney (English accent): Cryptocurrencies are crashing right now. They have followed the general trend of the rest of the markets. One of the big reasons why they’re falling is because they are very risky assets. So they’re mostly used for speculation. They’re mostly bought and held or traded by people obviously wanting to make money from them, which is fine. But they’re the highest risk asset class. So when the rest of the market starts to fall people are going to sell these first and move their money into more traditional places .
RADICAL TECHNOLOGY
But, says Learney, one thing is the volatility, another is the technology that makes these cryptocurrencies possible.
Robert Learney: There are other interesting reasons why they’ve been falling. There have been a couple of scams in the cryptocurrency world where systems have collapsed and traders have lost their faith in the market. But overall, I think it’s probably going to be a lot like previous crashes where cryptocurrencies have lost 75-80 per cent of their value, but then the underlying core proposition around radically transparent value transfer or radically transparent access to data come to the top, and people come back in because they’re really interested in what these technologies can do.
PATIENCE PAYS
And, Learney argues, at times like this it’s best to wait and watch.
Robert Learney: In fact, you could argue that a crash is very good for a market. Because it means the bad projects will die, and only the good ones that mean something will survive. So, we’ll see what happens in six months’ time. It’s always been an interesting space to watch. It’s always gone up and down like crazy. And as long as you don’t get too invested or emotional about everything, it can be very interesting to see which projects are happening and growing.
ORIGINAL AIMS
Crypto is mostly of interest to speculators. We asked Learney why.
Robert Learney: There were many promises in the early days of Bitcoin, and other cryptocurrencies. Things like giving individuals back control and power over their own money, but these have not taken off hugely outside speculation. So people buying these coins hoping they go up and then selling them or trading them. So these coins aren’t used for the original purposes they were imagined [for]. They’re not used so much as money. There’s a number of reasons why these are not popular with everyday people, and are mostly in the hands of either tech people who want to play with these, or speculators who want to try to make some money off them.
the future
So, what future do cryptocurrency and its technology have?
Robert Learney: These concepts about automating and opening up and building trustless systems all came from the ideas behind blockchain. And maybe the payment and the currency aspect are the less interesting parts of it. More what can we reinvent in our society using these technologies? There are some interesting concepts that are being born with these technologies and we are still in very early days with them. If regulators, and if banks were to allow more experiments with these technologies, you could imagine many transformations to how we do things. So, how do you know that the money you donated to charity really went to the project that it was set to go? What if you could see a live tracking of the money you donated as it flows through the company and goes into the village in Africa or pays for that water pump that you wanted to buy. So it’s about using these technologies to build better, more trustworthy systems, to enhance sustainability projects and carbon tracking around the world.
Crypto: Virtual Gold