Cryptocurrency, n. [cryp·to·cur·ren·cy, ˈkriptōˌkərənsē].
If you just imagined movie-style hackers typing frantically at keyboards in dark rooms, while secret money transactions fly in code on screens, you’re not alone.
Periodically when procrastinating on that glorious realm of Reddit, I scroll past a sidebar ad for the subreddit community called r/bitcoin that looks like this:
Out of sheer curiosity, I clicked on it once. The subreddit’s “about” section brazenly avers that “Bitcoin is the currency of the Internet” (their own emphasis).
Personally, I always regarded Bitcoins with mingled confusion and distrust, not unlike the first time someone told me about Google Glass. Other forms of cryptocurrency such as the Doge coin based on a meme and the “Coinye West” coin didn’t help matters much; while hilarious, they seemed more ersatz than legitimate, and just a liiiiittle dubious as valid (or even safe) forms of currency.
It turns out that the ad has origins in describing the nature of the Bitcoin. User Flailing_Junk (lol whataname) writes “I tell people bitcoin is decentralized internet money. I might as well be saying magic I think.”
Well? Is it a super hi-tech form of digital currency? Or some bizarre wizardry that the plebeians are doomed to fear and loathe?
Admitted to the Oxford Dictionary Online in August 2014, the word cryptocurrency is the prefix crypto-, meaning concealed or secret, and the noun currency, meaning the money or form of exchange in use, often specifically within a country. But don’t let the simplicity fool you. The crypto- part is actually derived from the method by which cryptocurrency is protected: cryptography, or encoding that protects both the production and transfer of said currency.
But hold up. How does this stuff even work?
Let’s start with the beginning. Cryptocurrency first appeared in 2009 when a (purposefully) anonymous person under the alias Satoshi Nakamoto created the Bitcoin. He was an anti-authority coder who sought decentralization, using cryptography to shift power from institutions to individuals.
So that’s the whole point: Cryptocurrencies might replace traditional state-backed currency because they’re coded and independent. They’re immune to banks, transaction fees, and inflation.
They’re open to anyone and everyone who wants to buy-in and play.
You might now be thinking, WOW IT REALLY IS MAGIC INTERNET MONEY!
And that’s a thought that many others are having—and acting on—too. In fact, in the famously rebellious Kreuzberg neighborhood in Berlin, you can buy fancy lattés, late-night mixed drinks, and even hipster vinyl records, all on Bitcoin. And in California, the world’s first baby has already been born due to a cryptocurrency transaction: The in vitro fertilization was paid for with Bitcoins. (Talk about good marketing for cryptocurrency. I think I see a future spokesperson here.)
But hold your horses there bronco, and you wallet too. There’s a not-so-little drawback that keeps me from fully recommending this concept.
Like the above two examples, Bitcoin has been plastered across various headlines. The Friday, Sept. 19th headlines read that the price of Bitcoin slipped down to $400—the lowest since April, yet Bitcoin broke front page news on TechCrunch again just yesterday, Sept. 23rd with the announcement that the price has “skyrocketed” due to being accepted as a form payment in PayPal.
But no real newsflash. The stuff is consistently volatile (if that’s not too much of an oxymororn).This chart from Coinbase.com shows the price changes per Bitcoin over time:
In fact, let’s look at that spike and jolting crash in mid-December, 2013, when China temporarily disallowed access to Bitcoin and related sites via the Great Firewall (tells you if things are blocked by Chinese censorship: try typing FreeTibet.org).
So, yes, cryptocurrency is progressive. It claims to be global, as good in the States as it is in Berlin. But it ain’t so global anymore when China shuts down the party.
Banks and governments may not have any say over cryptocurrency. But popular culture does; in fact, it fills the vacuum. As much as national culture can promote cyrptocurrency, it can commensurately destroy it.
The situation is doubly exacerbated by the fact that cryptocurrency is, well, so very cryptic to most. Because your average Joe can invest in Bitcoins, he may not make the right decision, investing too much at the wrong time, or panicking when things turn sour. As reported by Business Insider, the crash was apparently so extreme that Reddit sticky-posted a suicide hotline in response to it. The virtual cloud can turn dark quickly for those who don’t educate themselves on the true meanings of cryptocurrency.
So jump on if you will. Consider buying a Bitcoin or two. Outdo the Bitcoin Baby and be the next big triumph for magic internet money. But do so only after researching—in depth. You may sound smart to all you techie friends when you can explain the current state of cryptocurrency. But what’s more important here is understanding what the neologism cryptocurrency really means: It’s the first step in realizing its potentially damning flaws, and that you’re going to have to tread carefully if you’re going to play.