By Shianna Gibbons
Bitcoin took the world by storm in 2009 and cryptocurrency’s popularity is increasing as its potential solidifies. With the increasing value and popularity, it is important to understand exactly what cryptocurrency is.
Albert Sumell, Youngstown State University economics professor, said there are two unique attributes that separate cryptocurrency from traditional currencies.
“It is digital. There is no physical or tangible version of the currency,” Sumell said. “A second attribute is that it’s decentralized. There is no central authority that can manipulate or determine the value of that currency.”
Cryptocurrency is a general term for all purely digital and decentralized currency. The most well-known cryptocurrency is bitcoin. According to its website, bitcoin is defined as cash for the internet.
Sumell said cryptocurrency’s digital presence differs from traditional online banking.
“[Online banking] could be digital transactions, but there is always a dollar or coin equivalent,” Sumell said. “There is the potential for cryptocurrencies to have direct peer-to-peer transactions that do not involve an intermediary that would take some percentage.”
Feng “George” Yu, YSU associate professor in computer science and information systems, said due to cryptocurrency’s digital nature, it is very easy for anyone who has access to the internet to get involved with cryptocurrency.
“Almost everyone can participate in cryptocurrency in two ways. You can do crypto mining, and there are a lot of tutorials online and available. The tools for cryptocurrency are well developed and widely available,” Yu said. “If you want to trade, there are many trading platforms available — you just have to create an account and link your bank account.”
The second attribute of cryptocurrency is that there is no governing body or country that can influence the value of cryptocurrency.
Bitcoin and other cryptocurrencies’ value depends on the supply and demand of that particular cryptocurrency, Sumell said, and the same is true with traditional currency and other goods or services.
“[Cryptocurrency] is based on a market value,” Sumell said. “With the most well-known, bitcoin, there is a fixed supply, and what determines the overall price is whatever people are willing to buy and sell that particular cryptocurrency for.”
However, without the centralization of cryptocurrency, the value becomes subject to more instability. Sumell said the price of bitcoin is constantly changing.
“[Cryptocurrency] is less stable and more volatile than a traditional currency,” Sumell said. “With bitcoin, in a year it went from $6,000 to $60,000, then down to $42,000. Large fluctuations in a short amount of time.”
Sumell said that as an investment this can be a good thing, but its usage as a currency warrants concern.
“If you buy at a low price and then sell at a high price [it is good], but it presents a great risk. You do not know [whether] the price is going to go up or down,” Sumell said. “But as a currency, that is generally not good — that is not something people look for in a currency.”
Yu said those wishing to use cryptocurrency should learn about it and the technology surrounding it, and investment should be taken with caution.
“Since the cryptocurrency market is volatile and still developing, I also recommend to be cautious and keep learning if one wants to trade or invest in this market,” Yu said.
While some find the lack of a governing body a positive attribute of cryptocurrency, others say that, and the pseudonymity users have on the trading platforms, are pitfalls.
According to the U.S. Department of the Treasury, cryptocurrency has been associated with scams, heists, trafficking and other illegal activities. However, pseudonymity and the lack of a central authority to oversee transactions make it difficult to stop illicit transactions.
Alan Tomhave, YSU philosophy professor and chair of humanities and social sciences, said a regulatory body and accountability would mitigate harms associated with cryptocurrency.
“The people who are in control and make sure that the cryptocurrency is working properly have an obligation to keep an eye on who is using it,” Tomhave said. “Otherwise, you are creating a tool that can be used to engage in moral wrong or the conditions that allow for this to occur.”
Tomhave said decentralization has historically been used for good, which makes it a difficult line to draw when weighing the harms and benefits of cryptocurrency.
“We have seen cryptocurrency used to send money to Ukraine to pay for humanitarian aid, equipment or to help fight the Russian army. This is a good cause,” Tomhave said.
The Biden administration recently started discussing potential ideas to regulate cryptocurrency to mitigate harms and expand the benefits.
Yu said the blockchain that cryptocurrency uses can protect users from fraud. The blockchain is a distributed database to keep a record of the different transactions between different parties.
“Consensus is that when A transfers money to B, the A has to broadcast the message to everyone in the blockchain, and those involved need to verify this. This will avoid the fraud within the blockchain,” Yu said.
Sumell said with cryptocurrency’s growing popularity and the constant advancement of technology, cryptocurrency is not going away anytime soon.
“Cryptocurrencies will be around for the long-term because of the potential advantages associated with them and how well known they are now,” Sumell said.