This is my article from issue #2 of 2017 in Cupertino High School’s newspaper, The Prospector
This month, Bitcoin (BTC) prices skyrocketed passed the $5,000 mark, after starting the year at $966. Bitcoin has risen by more than 750 percent in the past year and is now worth nearly four times as much as an ounce of gold. One Ethereum (ETH), another digital currency, started off the year at a valuation of a modest $8. Today, its value stands near $300. With the advent of widely-successful cryptocurrency, several countries are tinkering with the possibility of replacing paper tender with a digital currency. Many tech-savvy individuals, venture capitalists and Wall Street investors are shoveling money into digital currencies in hopes of a stronger, decentralized economy. The fundamental ideas behind these currencies are to cut out the middleman from transactions, expedite the process of transferring money from one individual to another and safeguard an individual’s capital. Implementing a national digital currency would be beneficial for the U.S. government and its citizens.
Every cryptocurrency consists of a ledger distributed among all participants. A ledger is a detailed digital record of all transactions that have ever occurred on a given blockchain. Every time an authorized transaction takes place, it is noted on everyone’s copy of the ledger. A ledger is organized into blocks, each one holding a set of transactions that have been processed and verified. The blockchain is immutable and holds transactions in chronological order, detailing the addresses of the two wallets exchanging money and the amount delivered. In general, blockchains are decentralized, meaning that no individual or organization has the ability to create, update or destroy transactions that occur.
The idea of Fedcoin, a government-issued cryptocurrency, has been floating around the Bitcoin community. The Fedcoin blockchain would give the Federal Reserve the authority to manipulate the blockchain as well as the power to add or remove Fedcoin to the system as needed. Blockchains utilize sophisticated cybersecurity algorithms to prevent fraudulent transactions, ensuring the safety of assets. Because of this, cryptocurrency is a much safer alternative to printed cash. Furthermore, virtual currencies are efficient: transactions occur quickly without the need of a middleman. Middlemen facilitate a transaction between two parties, often taking a commission. Through digital currencies, middlemen such as Visa or Mastercard would no longer be necessary.
The use of cash has declined significantly over the past decade. Many online services, such as Venmo and Paypal, provide new venues for businesses and consumers to send and receive money. A reliance on these apps for our day-to-day needs places economic power in the hands of private entities. As more people rely on these products, these corporations rack up money through a small fee on every transaction. Rather than provide immense power to these corporations, the government should establish their own cryptocurrency.
Some individuals believe that cryptocurrencies are too novel to be immediately implemented within a national setting. However, this is not the case; many developed nations have prototyped systems for a digital fiat currency. Some have even begun testing them among their citizens. This month, Dubai debuted their own national cryptocurrency “emCash.” In a press release, Dubai Economy deputy director general Ali Ibrahim said, “A digital currency has varied advantages – faster processing, improved delivery time, less complexity and cost, to name a few.” emCash uses state-of-the-art blockchain technology and is designed to handle a plethora of transactions from “their daily coffee and children’s school fee to utility charges and money transfers,” all through the use of smartphone near-field communication — the same payment technology that Apple Pay and Google Wallet use.
Cryptocurrency is revolutionary and will likely change how we interact with money in the near future. The records are secure, verifiable and permanent. With blockchain serving as the basis for both private business and government services in the U.S., the economy would be significantly more efficient by gutting unnecessary transactions by middlemen and reducing the time it takes for money to travel. Thus, with cryptocurrencies, doing business in the U.S. will become simpler than ever before.