Within recent decades, cryptocurrencies have skyrocketed in popularity. Crypto can be found in various forms, and be bought, sold, and exchanged for goods and services. But unlike many other forms of currency, crypto is completely decentralized: it cannot be tracked or moderated by a government, and its security and anonymity makes it less prone to hackers. Crypto is generated through “mining,” a process that uses a computer to solve mathematical problems, resulting in solutions that create coins.
“There [are] hundreds of different coins that many people create, but most people trade a couple of the big ones,” said senior and treasurer of Aragon’s Investors Club Christien Wong.
One of the biggest forms of cryptocurrency is Bitcoin. Originally created in 2009, Bitcoin is widely considered to be the most popular form of crypto. Bitcoin, and other forms of crypto such as Ethereum and Binance, are traded and stored on a decentralized system known as a blockchain.
Investing in crypto, although intimidating to some, is a fairly easy process.
“It’s pretty simple nowadays to invest in cryptocurrency because it’s become so popular,” Wong said. “One way you can invest is by going through a website … like Coinbase where you can buy cryptocurrency.”
Wong himself has invested in crypto.
“One of the major spikes [in popularity] was in 2017 [and] 2018,” Wong said. “A lot more people cared about it. I think I bought around 10k, and I’ve been holding it ever since then.”
To many, crypto’s main appeal is that it is not controlled by a national government.
“If you look at a normal currency like the U.S. dollar [or] a Euro, it’s tied to the U.S. government or the European Union,” Wong said. “A cryptocurrency isn’t really backed by a government. It’s distributed on … a network of computers … Crypto is pretty much a bunch of computers solving very complex algorithms. And because it’s entangled with that … it’s a different kind of investment that can be used to diversify your portfolio.”
“The anonymity could also be a security benefit where you don’t have to worry about hackers getting your bank details”
Furthermore, many crypto-investors find the private nature of crypto more appealing than other currencies that can’t be tracked and moderated by a national government.
“There is the advantage of anonymity, if you’re privacy conscious,” said senior Justin Huskins. “Nobody, not even your bank, can look into your [finances] … The anonymity could also be a security benefit where you don’t have to worry about hackers getting your bank details.”
However, potential concerns and dangers have risen with crypto’s increasing popularity.
For starters, cryptocurrencies have a tendency to frequently fluctuate in value. Most recently, Bitcoin has seen major falls in value.
“It is based on what people are willing to pay for it,” Huskins said. “One day you might have people … willing to pay $50,000 for one Bitcoin, and then another, they might only be willing to pay $30,000 … That process inherently requires a lot of fluctuation … and there’s no central bank to keep that under control.”
Moreover, investing in crypto is different from investing in the stock market. While stocks are linked to companies and businesses, cryptocurrencies are not.
“There’s no inherent value to Bitcoin,” Huskins said. “If I were to invest in stock, there’s actual value to that [because] the company is producing goods and services … so in terms of an investment asset, I don’t think [crypto] really should be considered one.”
Fluctuation isn’t the only emerging problem. Recent scandals in the crypto world have resulted in the safety and security of cryptocurrency being called into question. Most recently, in November of 2022, FTX, a cryptocurrency trading platform, was sued by investors for “deceptive conduct,” resulting in the company–and its users–losing billions of dollars.
“Because [crypto] is a decentralized currency that’s not based around the government, if you lose all your money, the government can’t really do anything about it,” Wong said.
And FTX isn’t the only company that has been accused of fraud.
“Last year, some people made a Squid Game [the hit 2021 Netflix series] token,” said junior Brennan Pavolotsky. “They ran off with $8 million, and there’s nothing to be done. That $8 million cannot be recovered, and the investors … fell for that scam.”
In order to avoid these types of fraudulent situations, Wong emphasizes the importance of using safe, reliable platforms when investing.
“PayPal, which is a pretty well known and established company, is something that I [advise] people to use,” Wong said.
“On one hand [government regulations] defeat the purpose of having crypto decentralized, but on the other hand, crypto is a risky thing”
With companies like FTX lending out and losing money, along with users’ trusts, some believe that government intervention is not only necessary but inevitable.
“The government is going to get involved,” Pavolotsky said. “That could either be investigating these companies [and] preventing them from making risky moves or it could also mean … getting persecuted.”
Regarding persecution, Sam Bankman-Friedman, the founder of FTX, is on trial for charges of fraud.
“There’s a chance he’s going to be locked up for what happened,” Pavolotsky said.
With the threat of fraud comes the question: Should there be more government regulations on cryptocurrency?
“On one hand [government regulations] defeat the purpose of having crypto decentralized, but on the other hand, crypto is a risky thing,” Pavolotsky said. “I don’t know what the fine line between regulation and … independence [is], but … we’re getting to a point where we’re about to establish that.”
The future of cryptocurrency is unclear. Whether it will continue in its rising popularity or fizzle out cannot yet be determined. Similarly, additional government regulations on crypto may or may not be introduced. Yet regardless of what the future holds, the controversies and mixed opinions surrounding the advantages and disadvantages of cryptocurrency undeniably make it a topic worth discussion.
