Virtual currency and the issues of blockchain
We have seen the intense progression of computer technology—blockchain and cryptocurrency are the results of advancing computer technology in our contemporary world. With cryptocurrency becoming increasingly popular, the Bank of Canada is looking for a way to capitalise on the crypto-boom by considering the introduction of a digital loonie.
It makes sense for the Bank of Canada to try and capitalise on the crypto boom. However, I believe blockchain is a useless invention with too many dangers to be considered seriously in adding this technology to our economy.
Cryptocurrencies do not have any inherent value. Cryptocurrencies are merely lines of code; one cannot touch or feel them; they are files of a computer.
There is nothing backing cryptocurrency. Like the Fiat currency, cryptocurrency’s value relies solely on supply and demand. The speculation behind the importance of the coin is what is driving its value.
Investors could wake up tomorrow and decide that crypto and blockchain are useless, and crypto would lose most, if not all, of its value.
How can an idea that volatile even be considered as a new mainstream currency option?
The answer is simple. Blockchain has an important feature that Fiat currencies lack: anonymity. Blockchain transactions are virtually untraceable.
Some might like the idea of the government not being able to know how an individual spends their money, but blockchain allows criminal activity to thrive.
I am not talking solely about individuals who may use the veil of blockchain to hide their misdeeds. However, instead, the potential for rogue states to fund and hide criminal activities on the global level.
Former British Prime Minister, Theresa May offered her opinions on cryptocurrency and offered this response: “Cryptocurrencies like Bitcoin, we should be looking at these very seriously precisely because of the way they can be used, particularly by criminals.”
Theresa May is correct; there is no way of knowing how people use this technology, but considering that Bitcoin is the primary transaction method on the dark web, I would contend that speaks volumes on the actual uses of cryptocurrency.
Furthermore, since blockchain is a computer algorithm, it can be hacked and manipulated.
However, hacking is the least worrisome risk associated with blockchain. Nothing on the internet is unbreakable. With the advancement of supercomputer technology, the threat of hacks will always be there.
The concept of blockchain is good for the increasing globalization that is currently happening. It allows for an equally valued currency that is not subject to any government intervention or manipulation.
Nevertheless, the risks and volatility that are associated with crypto should not be understated.
There needs to be transparency to ensure global security and stop individuals and organisations from using cryptocurrency to fund their criminal activities.
The Bank of Canada and other government organisations worldwide need to consider blockchain’s fatal flaws and not be swayed by its massive popularity when considering adding blockchain to their respective economies.