As the cryptocurrency sector continues to grow, it is becoming increasingly difficult to discount the industry, as was the practice in the early days of Bitcoin. As people continue to use cryptocurrencies and its market value has risen over the years, many who were against the use and proliferation of decentralized digital currencies have begun to change their stance.
However, the debate still rages on. For many, cryptocurrencies are still just another passing fad. The “blockchain not bitcoin” argument continues to gain steam, and in some corners, cryptocurrencies are often relegated to a spot in the annals of history among inventions received with much aplomb, but ultimately failed.
Interestingly, it is possible to draw parallels between how the argument against cryptocurrencies is progressing and that against any innovation.
ConsenSys founder and Ethereum co-founder, Joe Lubin, posits in a Quartz article that resistance to change is one of the main reasons cryptocurrencies are facing significant pushbacks. This is especially true of traditional holders of power and influence such as the state or financial institutions.
Arguments against Crypto
The arguments against cryptocurrency have evolved with time. In the initial days, after the creation of the world’s first decentralized digital currency, discussions were centered around security. Seeing as the technology was entirely new, these concerns weren’t illegitimate, especially as this system was supposed to act as a store value. With time, it became apparent that blockchains, especially Nakamoto’s, are well designed and can stay secure, even as the number of users increases.
As the cryptocurrency sector grows, the users of blockchain-powered currencies and tokens also continue to increase. As a result, many blockchain networks have witnessed a fall in their transaction speeds. Several of these networks were supposed to handle a large number of transactions, enough to rival traditional payment processors, but are failing. Both the Bitcoin and Ethereum networks are very slow compared to those of Visa or MasterCard, for example.
In response to this, new blockchains are now being constructed with scalability as a significant part of their design. Additionally, established cryptocurrency networks, such as Ethereum, are mulling over changes to their code that will improve their settlement speeds.
It is true that for cryptocurrencies to completely replace the systems currently in place they must overcome these scalability issues. As it stands, however, cryptocurrencies are functioning in an effective, albeit slower manner.
Arguably, the most referenced argument against cryptocurrencies is that of fluctuating value. The value of many digital currencies swings wildly from moment to moment. It is not unusual to find the value of a token closing at a much higher or lower value than the position it opened at on that day. This has become something of a linchpin for detractors of the sector.
While stability is an important feature for a medium of exchange and store of value, it is arguable that some of the fluctuations witnessed within the sector are typical of young industries. Additionally, many of the major corrections are connected to legal developments in countries. This is to say that the value of bitcoin, and as a result, the whole market, is affected by fears of stifling regulation.
Other arguments against cryptocurrencies include the carbon footprint of blockchain networks, ease-of-use, as well as the connections to criminal activity. Miners use a lot of energy to secure their networks, with the Bitcoin network reportedly using more energy than that of several small countries. However, new reports show the network uses less energy than banks. Additionally, there are developments across the world being created to reduce these energy costs.
Ultimately, many of the arguments against the cryptocurrency sector are very much a matter of subjective opinions. While rooted in some facts, what these mean concerning the nature and future of the industry are a matter of interpretation.
A Case of Deja Vu?
History is littered with instances when society refused to acknowledge new information. This is especially true if the theory challenges the pre-eminent worldview at the time. Perhaps one of the most well-known examples of these is the sentence of Italian astronomer, Galileo Galilei.
Galilei was amongst one of the first people to publicly oppose the church-sanctioned theory of a geocentric universe. Following his inventions, among them the telescope, Galilei was able to determine that the earth is round and not the center of the universe. This is referred to as the heliocentric universe.
At the time, the church was a powerful entity, able to control much of how society functioned. Because the church backed the geocentric universe theory, Galilei was charged with heresy by the Inquisition. Escaping imprisonment in the first trial against him, he was eventually sentenced to life imprisonment in his second trial when he published a book iterating his belief in the heliocentric universe.
In hindsight, this seems like an inane argument, but at the time it was a development that was so strange that it inspired such a show of force from those in power. It is somewhat similar to the case against cryptocurrencies. Lubin says:
“Every time someone comes up with a new representation to manage the physical world, people become suspicious.”
The resistance against cryptocurrencies is interesting. It is evident that digital currencies bear the markings of a challenge to an established system. For instance, the question of what constitutes money comes into play. What makes an item fit to be considered an effective store of value? Are cryptocurrencies money?
Those within the traditional financial system are likely to say no. The global banking network creates and wields power and influence that those within it are unlikely to welcome as disruptive a force as cryptocurrencies. Additionally, the decentralized nature of these currencies is the antithesis of the centralized financial system.
When Marco Polo first returned from his trips to Asia with reports of paper money, much of the west was in disbelief as to how a system like that would function. While it was initially labeled ludicrous, it is now the very system that the global financial network uses. For now, at least.