Keoni Buenavista
05/05/2022
Prompt: Should cryptocurrencies be encouraged or banned by governments? What are the pros and cons of it? What are cryptocurrencies?
Starting in 1983, a man named David Chaum introduced the first iteration of cryptocurrency as we know it today and was given the name “ecash”. Cryptocurrency or also called crypto is a type of currency that is digitized and made to function as a way of exchanging goods and services through a computer network. Unlike many other forms of payment today such as debit, credit, or cash, crypto has no reliance on any type of central authority like a bank or government as its foundation. To store records of transactions between users of the cryptocurrency, a digital ledger is used which uses cryptography as means of securing transactions and making them private to only those originally involved in the transaction(s). Additionally, the digital ledger functions as a means of controlling the creation of additional coins or tokens within that particular cryptocurrency and in the verification of the transfer of cryptocurrency to ensure that it goes to the right users.
With an understanding of what cryptocurrencies are and their basic functions, should governments put heavy restrictions on them or not? In my belief, I think cryptocurrencies should be regulated if not banned by governments. My concern with cryptocurrency arises from the possibility of breaches of laws such as tax evasion or money laundering. Currently, networks for cryptocurrencies have lacked much regulation and with the anonymity of crypto, individuals can have transactions of items or services without their identity being discovered, even by the government, which may be a large national security issue. As a result of these transactions occurring through the use and exchange of these this type of currency, which is independent of traditional banking systems, individuals are able to have a much simpler means of evading taxes.
Along with the impact that crypto has on national security, it also has an effect on the Environment. In order to verify transactions with cryptocurrencies, there are miners who essentially make sure that the transactions between individuals or groups are handled and correct. For Proof of Work, cryptocurrencies usually require large amounts of electricity for these computations which have largely affected the environment. The two largest impacts that crypto has on the environment pertaining to its carbon footprint, and electronic waste. Starting with its carbon footprint, mining cryptocurrencies produces carbon emissions which is mainly due to the efficiency of the specific cryptocurrency networks. For transactions, Bitcoin has shown to be the least efficient per transaction using over 700 kilowatt-hours while the most efficient is XRP with only uses 0.0079 kilowatt-hours of electricity for every transaction. With regard to electronic waste, as hardware used to mine crypto improves faster and faster, older generations of hardware become the result.
My last reason why governments should put restrictions and/or protections on crypto networks is because of the current limitations of technology. To access funds from transactions in cryptocurrencies, it requires private keys. These private keys can be lost permanently due to loss of data, malware on local storage, or destruction of the storage containing those digital private keys. In addition, as cryptocurrencies expand, miners will be faced with high upfront costs in terms o hardware and software that will be specialized to handle higher demand and other computing tasks in relation to cryptocurrencies.
In Conclusion, while crypto is a capable and interesting type of currency, it still has some dangers. Those dangers impact national security and the environment, and it has limitations that could harm others if they happen to lose private keys to their currency (as in no backing from the government). If governments put limitations and/or protections on users of crypto, then it might be a much safer and more reliable type of currency.