Digital Currencies for a Digital World: Bitcoin is Here to Stay

Hans Janovy Meyer, staff writer

Throughout the history of communication, letters turned to telegrams, which turned to phone calls, which turned to email, which turned to texting. Theater turned to the movie theater, which turned to television, which turned to Netflix. Even money has changed over time: gold coins turned to paper money, which turned to credit cards, and now currencies based entirely on algorithms are challenging more established forms of money.

According to Edina High School Junior William Leach,  “A cryptocurrency is an open-source commerce system utilizing digital cryptography to create a fully-digital, fully decentralized currency.” In layman’s terms, a cryptocurrency is a digital “coin” that is not controlled by any one entity or government (and is therefore “decentralized”). The value of cryptocurrencies is determined mostly by the market, as any other fiat currency is (a fiat currency is a currency that is not backed by any physical good, such as gold).

One of the problems with the current systems for transfering money is the amount of time it takes and the large transfer fees. “If I wanted to send $1,000 to a family in across seas, I’d have to go through a 3rd party like Western Union, it’d take 1-3 days, they’d charge me a ~10% fee, and I’d have to put trust in Western Union to actually execute the transaction. With Bitcoin/Ethereum/IOTA, I could send that same $1,000 to the family almost instantly, without trusting a third party,” Leach said. The ease of transferring money is just one of the reasons that cryptocurrencies were created, among others such as increased anonymity when spending money and reduced risk of fraud.  

Bitcoin was the first ever cryptocurrency, and was created by an anonymous figure who goes by the alias Satoshi Nakamoto. Since its introduction in 2008, Bitcoin’s price (BTC) has risen exponentially. In December of last year, BTC rose to a record high of just over $19,000 for each coin. However, these crazy prices are simply spikes and are not sustained for long. The value of all cryptocurrencies fluctuates with the market. From November 1st, 2017 to February 1st, 2018 Bitcoin dropped to a low of $5,507.29 on November 12th, and a high of $19,783.07 on December 17th.

The stability of these currencies threatens their usability. According to Jonas Chokun, a writer for 99Bitcoins, a website for cryptocurrency users, dozens of large corporations accept Bitcoin as payment, from WholeFoods to the Libertarian Party. On the other hand, large companies such as Valve, the videogame development company, and Forever21, the clothing retailer, both recently made decisions to no longer accept Bitcoin or other types of cryptocurrencies. The reasons for companies not accepting cryptocurrencies is simply because the price fluctuates too much, and also because the transaction fees would often be more expensive than the thing that they are purchasing.

The value of cryptocurrencies is currently increasing, and new “altcoins” are introduced all the time. An altcoin is another cryptocurrency that is programmed differently to serve a different purpose, or do something better than other cryptocurrencies. Litecoin and Ethereum are two very popular altcoins. “Ethereum has all same the advantages over fiat currency that Bitcoin has, plus a more efficient mining process (proof of stake instead of proof of work) which significantly reduces transaction fees and power usage from miners,” explained Leach.

The future for cryptocurrencies seems bright, and enthusiasts are optimistic. “I think they will keep becoming more normal until that point because as we modernize as a society, cryptocurrencies have a pretty big place in the way we spend money and buy things as consumers,” Edina High School Junior Wyatt Richards said. Cryptocurrencies definitely have a place in the future, but it is up to the consumers to determine how successful they will be in the long run.

If you are interested in reading our full interview with William Leach, it can be found here.