Cryptocurrency: The Trillion Dollar Industry That No One Understands
The confounding rise of the blockchain
In the last few years, the subject of cryptocurrency has grown difficult to ignore. What started as sparse headlines regarding the price of Bitcoin in the 2010’s, though, reached a fever pitch before its 2021 crash. Though it’s not quite the topic of conversation it was then, in some circles it’s still difficult to avoid. And while you can’t expect your grandpa to explain the blockchain just yet, even he has probably been bombarded with his fair share of Doge Coin-related content by now.
The world of cryptocurrency is complicated and there are few who truly understand it. Even outside of it, though, we’ve found ourselves dealing with more and more of these innovations that we struggle to make proper sense of. How the internet works is a subject I may never personally get to the bottom of. The inner machinations of the phone in my pocket will likely always remain a mystery to me. That we ever got planes and rockets into the air is a perpetual source of amazement in my life.
The key tenets of what keeps our world spinning are something beyond most of our grasp. I spent a few hours this week reading about quantum computers, and I’m still not sure I can provide even a Sparknotes summary of what they can do. That they’ll be playing a larger and larger role in our lives in the coming years, though, seems almost inevitable.
Cryptocurrency is one of the latest and greatest examples of these technological conundrums on which society stands. Though figures vary, some estimates for the total amount of money invested in cryptocurrency exceed a trillion dollars. According to NBC News, 21% of American adults are invested in cryptocurrency, even after a few enormous sell-off periods. And yet, it functions under a shroud of unrepentant mystery.
When asked to simply define cryptocurrency, my equally inexplicable artificial intelligence companion, Chat-GPT, explained that:
“Cryptocurrency is a digital or virtual form of money that uses cryptography (advanced encryption techniques) for security purposes. Unlike traditional currencies issued by governments, cryptocurrencies are decentralized and are not controlled by any central authority. They are stored, transferred, and managed on a digital network called the blockchain, which is a public, secure, and tamper-proof ledger.
Transactions made with cryptocurrencies are verified by a network of computers, called nodes, that use complex algorithms to confirm the transaction’s validity. Once verified, the transaction is added to the blockchain, making it nearly impossible to alter or reverse.
It’s a description that, no matter how many times I receive, still hovers above my head and soundly out of reach. The blockchain is an abstract concept that I struggle to wrap my head around.
This nebulous realm of intangible currency continues to operate, though, even if few of us can really make head or tale of what happens in it. The science of stocks can be similarly hard to penetrate. Though anyone can enter into the stock trade, it’s not many people who can make proper sense of the complicated trends on those ever-changing graphs.
But unlike with stocks, the entire domain of decentralized currencies is steeped in incomprehensible terminology that seems sometimes to be purposefully designed to confuse. This new terrain is defined by shady back channels of finance and a proliferation of 30 digit passcodes to exchanges and wallets that may not survive to see tomorrow.
If the collapse of FTX speaks to any of the broader trends at play within the land of cryptocurrency — which it most certainly does — then billions and billions of dollars are invested in valueless coins with names like “Putincoin,” “Shiba Inu,” and “WhopperCoin.” The market is so oversaturated with these nonsense currencies that it begins to appear that the price of admission into this world is virtually non-existent; anyone can simply invent a currency. With enough jargon about, “non-fungible tokens,” “chainlink,” and “the ledger,” people might even think it’s useful.
What does “Swapzone,” provide and how is it different from “SafeMoon” or “Banana Coin?” Couldn’t tell you, and I’m cynical of anyone who says they can.
Even the cryptocurrencies with purportedly distinct utilities can hardly be understood by people without a year or two of computer science under their belt. Hearing their functions described is more circuitous than most Jordan Peterson dissertations. Even having given it months to familiarize myself with the key concepts at play within this abstruse new world, I’ve remained no less in the dark. At worst, the cryptocurrency trade feels like a horse race in which most spectators are unaware they’re blindfolded.
When I first began exploring the possibility of this revenue stream, I joined some Facebook groups devoted to cryptocurrency. I hoped that I could not only get some sense into where I should be investing my money, but to get clearer insight of what exactly this new world was that so many people were suddenly investing their money in. What I’ve found instead, though, perhaps not unsurprisingly, is that so much of the bravado and soul-less finance obsession that surrounds the world of stocks is alive and well in the cryptocurrency trade.
But where occasionally the stock traders might impart some actionable wisdom in the articles they write and the comments they contribute to these groups, cryptocurrency investors appear to be firing largely in the dark. The articles that purport to offer insight seem to provide spurious speculation at best. The entire market is volatile and people buy into it on spontaneous gambler’s urges.
People place bets on little more than whims and cool sounding coin names and then shoot for the stars with niche memes and “Shiba to the moon” tweets. They put on their crypto expert hats when one of them soars inexplicably and go silent when the $1000 invested into a cryptocurrency for dentists, called “DentaCoin,” suddenly evaporates.
I’ve yet to meet someone who can meaningfully distinguish between “Doge Coin” and “Shiba Inu,” but to hear crypto investors speak on the subject, you might be woefully misled into thinking this is more than a guessing game built on an incomprehensible charade. I think this hazy new institution may actually depend on people’s lack of understanding, though.
The potential of this new money-making opportunity has people conveniently looking past the fact that they can’t even follow how it operates. It’s impressive in a way. That millions of people have already jumped on the bandwagon is excuse enough for millions more to follow suit — blithely ignoring that they can’t even grasp what the blockchain is to begin with. We can make even less sense of the distinction between these pseudo-currencies than most Americans can make of the antiquated language of their founding documents.
Whether cryptocurrency will be a part of our future remains unclear. As we go in an increasingly digital direction in society, it wouldn’t surprise me to see people paying for their groceries with Bitcoin and Etherium in ten years. It’s already beginning in some places. Whether the future of finance will be divided between a thousand comically named cryptocurrencies and memecoins, though, I’m cynical. As of right now, the world of cryptocurrency appears like a flock of sheep being led silently into the fog by the money-hungry opportunists of a burgeoning new age.