Cryptocurrency is a hot topic these days, and for good reason: governments around the world are considering using cryptocurrency as their official currency, or at least as a reserve. A currency is a kind of standardized money, and a “money” is an item or verifiable record that is accepted as payment for goods or services, according to Encyclopedia Brittanica. There is a difference between a ‘money’ and a legal tender: by this standard, winning tickets to exchange for prizes at the arcade counter means you’ve earned ‘money’, just not legal tender as most governments recognize it. Other countries’ currency also generally won’t be taken as-is in a shop, even though it’s legal somewhere.
A cryptocurrency is what you’d guess from its name: a digital currency. Most are built around something called a blockchain, a sort of serial number and token history combined into one. Each Bitcoin has a unique serial number, and to be sure the system doesn’t glitch and count the same token being traded twice, the entirety of the Bitcoin network is constantly being verified. However, most countries are not currently taking it as legal tender, and it also must be cashed out into another currency before they can be spent.
You may guess from the Bitcoin spikes, the NFT crash, and other various news stories that cryptocurrency is not exactly stable. The price one pays for a lack of oversight is a lack of oversight – nobody can control or track your money, in theory, but by the same freedom, the money is constantly fluctuating in value, sometimes by a lot. All of that verification ensures the recorded transactions actually happened, not that the value stays stable. This makes doing ‘real’ business difficult. A U.S. dollar now will be worth a U.S. dollar and three cents a year from now, which will translate to roughly 22 Mexican pesos, or 127 Japanese yen, etc. basically as a guarantee unless a war breaks out, a bubble pops, or some other catastrophe wrecks a market so bad it’s money tanks too. A Bitcoin will vary by thousands, sometimes tens of thousands of U.S. dollars month to month.
Despite the wild fluctuations, it’s actually not the least stable currency a country could have: a lot of countries who are looking to adopt cryptocurrency as an official legal tender are struggling with problems like hyperinflation, and so having a currency that’s a little bit more stable at all is an improvement. Bitcoin (which can be exchanged for a number of different currencies with ease) might be easier to do business with than the Venezuelan Bolivar. Where banks can’t be trusted, crypto does what it was made for – which is existing outside of them. That doesn’t explain why the U.S. government with its relatively stable dollar is threatening to get into it, but it would explain why others were.
The original, libertarian idea of crypto is one where the government doesn’t control the money, and the bank can’t freeze your assets or ‘forfeit’ them because they suspect you might have done something criminal to get them. A lot of early Bitcoin trading happened online for exchanges where people could get in legitimate legal trouble if real money were used, because while small bills will make you very tough to track in person, digital money online (like a credit card) may as well be a camera feed following you Truman Show style. In theory, crypto is something good to have, especially in an environment where the government may do something crazy like ban alcohol again, or make certain drugs so hard to acquire legally that the only option for someone who legitimately needs to have it is to buy it online.
But what if it becomes an official tender? Suddenly it might be subject to new rules that make it not Bitcoin anymore. The entire project was created by someone who seems to have disappeared from the planet, and what happens to it now is determined by who has the most money in it. If the entirety of the U.S. treasury is thrown at it, Bitcoin might become something it’s not. New rules and trading regulations for wallets and the like might make it easier to track purely as a necessary function of a legal tender.
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