It was winter of 2012, I came to know about Bitcoin through some tech article. My curiosity got piqued, I searched more about it and really liked technology behind that. I downloaded a bitcoin miner into my laptop, created my digital wallet and started mining irregularly. Not certain, but I might had some very tiny fraction of bitcoin in my wallet, later laptop crashed and I forgot about that entirely. Never saved wallet address anywhere, which I regretted badly in 2021.
In 2010, a man bought 2 pizzas with 10,000 Bitcoins, which he regretted a lot later. Bitcoin exploded by 2013, people were building special mining machines set up in racks like data centers, to solve the mathematical problems in order to earn Bitcoins. Math problems were getting harder and harder to solve causing the need of more processing power and essentially electricity and cooling. Entire hardware tech popped up, selling crypto miners, softwares, cooling solutions. Many put up mining centers in cold regions such as Iceland, Canada, Nordic countries even Artic circle to reduce cost of cooling.
Many people who mined/bought and sold bitcoins became rich, called as Crypto Billionaires/Millionaires. Suddenly crypto was the next big thing. People invested fortune in it, some made fortune out of it. It is decentralized and freely available through internet. What made it big was no government control. Eventually, just like any other medium, people started using it for illegal things, crimes, hackers started asking for bitcoins, transactions were happening in crypto amongst criminals, smugglers. That is a dark a side of crypto.
In 2021, Bitcoin value reached its peak, almost $65,000 USD only to fall afterwards.
Blockchain: Tech behind crypto that matters
In 2008, when Satoshi Nakamoto published the white paper on cryptocurrencies, tech world went abuzz. The paper was named “Bitcoin: A Peer-to-Peer Electronic Cash System” and solved the famous problem of double-spending.
Blockchain, is a literally the chain of blocks. Each block consists of header and a body. Header contains the hash or address of previous block, a timestamp and a nonce and the Merkle root. The Merkle root is the hash of a Merkle tree which is stored in body. The body contains the information of transaction. Each block needs to be verified by peers in a network. It becomes a decentralized ledger of transactions where each block is immutable. A set of rules called smart contracts stored in blockchain, are basically programs that runs when certain conditions are met without anyone’s involvement. I will not go in depth of the technology, you can read it here and many other places.
Problem with Cryptocurrencies
According to me, there are several problems in cryptocurrencies, out of which following are the crucial ones.
- Lack of regulations: There are no government regulations whatsoever. In the modern world, governments run the countries, creates policies around the people, trade, economy and security. Each country has its own regularized currency which is a legal tender, essentially they are controlled and safeguarded in multiple ways by central banks. Currencies are closely related to trade and usually referenced upon oil/US dollar. Historically banks control legal tender in inflation scenarios. There is no such thing with Crypto.
- Volatility: With crypto these things are inexistent. It is absolutely volatile. The ups and downs are unpredictable and few powerful people/organizations like Elon Musk can single handedly control/cause fluctuations just with a tweet.
- Scalability: In a lifetime of Bitcoin, there can only be 21 million of them. Once it reaches 210,000 blocks, halving is done which cuts rewards by 50%. It may not reach to all people due to the scalability issues.
- Cybersecurity: I believe anything that is digital, can be hacked. Crypto is not exception to this as well. Many many people have lost hundreads of dollars to hackers who hacked the digital wallets. Crypto exchanges have became hub for cyber attacks. Many organizations were victim of ransomware attacks where hackers demanded bitcoins to release back the data.
Future of Crypto
Though I think crypto as a very risky asset to invest in, it has a future. Many times I think when human settles on Mars, it won’t have any physical currency, Mars will be governed with crypto, funny thing is, there is already a MarsCoin.
However, the most important thing is that crypto, has brought to world is underlying technology stack, blockchain. Blockchain has immense scope in future in variety of fields especially in banking. The Reserve Bank of India, often known for its anti-crypto stance, is already working on finding solutions based on blockchain, to various problems existing in society like this. After the greatest ever crash, recently in June 2022, people are talking about how RBI saved many Indians from plausible economical catastrophe.
One thing is for sure, if the important problems of cryptos are fixed, like regulations, security etc., it will have the great future. And if you are able to find solutions to these problems you will be remembered for years to come and can make a good fortune.