Our economy has created countless possibilities to earn wealth, but we have always known that money must be created from something real. However, this does not apply to cryptocurrencies since billions of dollars are being created through a virtual process known as ‘mining’.
Any discussion on new technologies must be carried out with great caution. The bitter words of those who were skeptical about the internet during its inception have not aged well. There are also countless examples where a technology that was hailed to be a complete game-changer went bust. So, any talks about new technology must be met with optimism as well as skepticism.
If you have been following the news lately, you might have heard the word bitcoin or cryptocurrency frequently. For most people, it is a combination of everything they do not understand about money and everything they do not understand about computers.
Although Elon Musk and Tesla have reversed their ships in the bitcoin battle, the growth of cryptocurrencies is still rapid. Microsoft now accepts bitcoins for software, so does PayPal and many other major corporations have also warmed up to other cryptocurrencies. While bitcoin may be the most popular cryptocurrency at the moment, there are many others, such as Ethereum, Binance, tether, and a whole lot more. There is even a coin named dogecoin which started as a joke, but as far as I can tell it is the same as all the other coins because the whole thing is a joke.
I accept that our existing financial system is not perfect, but at least it is real. Nepal Telecom stock is valuable since it is a legitimate company that delivers a service to its customers. However, Dogecoin (a cryptocurrency that emerged as a joke) has surpassed the market cap of the Ford Motor Company and has a market cap about 45 times larger than Nepal Telecom. All of this, even though it has no products and no employees, is a fictitious coin that serves absolutely no purpose. If I were to spell it out in the simplest terms, there is something fundamentally not credible about amassing hundreds of billions of dollars in virtual riches while accomplishing nothing, with no goods created or service rendered.
Our economy has created countless possibilities to earn wealth, but we have always known that money must be created from something real. However, this does not apply to cryptocurrencies since billions of dollars are being created through a virtual process known as ‘mining’. This is not the type of mining we are familiar with; it is a process involving rooms full of supercomputers to construct something that is purposefully arbitrary. In Lehman's words, mining is a process where one computer thinks of a number from one to infinity and another computer takes trillion attempts to guess that number to earn fantasy coins.
While cryptocurrency may not produce anything real, what is real is the massive amounts of electricity required to mine them. The energy being used to guess numbers and win imaginary prizes through this so-called mining is greater than that used by Facebook, Netflix, Microsoft, and Google combined. The environmental damage unlike the coin is real and is affecting us. Cars and planes are bad for the environment, but at least they take you somewhere.
There is a mania emerging around the world revolving around cryptocurrencies and how the ship is ready to sail so you better hop on. However, it may be nothing more than an open Ponzi scheme.