Reader-Response Journal (Cryptocurrency and Blockchain) By:

Nathan E. Talosig
Spencer (2017) tells us the story of the first time she heard bitcoin. She was sitting in the
middle of her local mall waiting to get the rest of her shopping done when she overheard
someone say they had completed a payment using some sort of digital currency. She laughed to
herself: That’s definitely not going to catch on. I would be lying if I didn’t say that me and
Spencer had the same opinion when it came to cryptocurrency. Years later, she and I have been
eating our words as digital currencies continue to be adopted by major brands and platforms
online. Royal and Voigt (2020) explains that cryptocurrency is a form of payment that can be
exchanged online for goods and services. Frankenfield (2020) adds that cryptocurrency is a
digital or virtual currency that is secured by cryptography, which makes it nearly impossible to
counterfeit or double-spend. Cryptocurrencies work using a technology called blockchain, which
is described by Simplilearn (2020) as a structure that stores transactional records, also known as
the block, of the public in several databases, known as the “chain,” in a network connected
through peer-to-peer nodes. Typically, this storage is referred to as a ‘digital ledger.’ Friedman
(n.d) states that the blockchain technology, which is the backbone of digital currency, has the
potential to disrupt financial services by reducing the cost and complexity of financial
transactions, while also augmenting transparency. He said that the implications of blockchain
technology are far-reaching, not only in financial services, but in other areas such as healthcare,
government, law, education, technology and more. Simplilearn (2020) enumerates some of the
advantages of the Blockchain technology: 1. It is highly secure as it uses a digital signature
feature to conduct fraud-free transactions making it impossible to corrupt or change the data of
an individual by the other users without a specific digital signature, 2. It uses a decentralized
system which results in smoother, safer, and faster transactions, and 3. Its automation capability
as blockchain is programmable and can generate systematic actions, events, and payments
automatically when the criteria of the trigger are met. As digital or cryptocurrencies use the
blockchain technology, all these advantages also apply to both, which makes cryptocurrencies
very enticing. Bovaird (n.d) said that one of the greatest benefits is that cryptocurrency cannot be
counterfeited and transactions cannot be reversed arbitrarily by the sender (as credit card
chargebacks can). Spencer (2017) adds that cryptocurrency transactions provide anonymity.
Credit cards operate on a pull basis where the store identifies the transaction and “pulls” the
amount of the sale from the card. Cryptocurrency uses a “push” model which prompts the
cryptocurrency holder to send exactly what they want to the seller without any other form of
information. Cryptocurrency is also not bound by exchange rates, interest rates or transaction
charges. In addition, digital currency transactions take place at the same speed, regardless of
where the sender and receiver are located. These advantages, I think, prove that cryptocurrency
is the future. I would even go so far as to say that the question isn’t whether cryptocurrency will
take off but when it will take it off.
There are different types of cryptocurrencies that are out there in the world right now.
Frankenfield (2020) states that the first blockchain-based cryptocurrency was Bitcoin, which still
remains the most popular and most valuable. Bitcoin was launched in 2009 by an individual or
group known by the pseudonym "Satoshi Nakamoto." The other types or competing
cryptocurrencies spawned by Bitcoin’s success, known as "altcoins," include Litecoin, Peercoin,
and Namecoin, as well as Ethereum, Cardano, and EOS. Today, the aggregate value of all the
cryptocurrencies in existence is around $214 billion—Bitcoin currently represents more than
68% of the total value.
As stated earlier, cryptocurrencies are becoming popular and gaining traction. According
to CoinMarketCap.com, there are more than 6,700 different cryptocurrencies that are traded
publicly and cryptocurrencies continue to proliferate, raising money through initial coin
offerings, or ICOs. The total value of all cryptocurrencies on September 2, 2020 was more than
$370 billion and the total value of all bitcoins, the most popular digital currency, was pegged at
about $210 billion. According to Charles Bovaird, a financial writer and consultant who has
worked for State Street, Moody's and Citizens Commercial Banking, cryptocurrencies have been
drawing significant interest over the last several months. “This growing visibility is evident in
both Google Trends search data and also the rising market values of the digital currencies
themselves,” he said. Zack Friedman, founder and CEO of Make Lemonade whose career has
included stints as CFO of a global energy company, hedge fund investing and jobs with The
Blackstone Group and Morgan Stanley, said cryptocurrencies have undisputed advantages but an
uncertain future. “Proponents of cryptocurrencies cite several key advantages, namely
decentralization, anonymity, security and automation,” Friedman said. “However, investors are
split regarding the stability and merits of cryptocurrencies, with some believing they represent
the wave of the future, while others dismiss them as pure speculation.” I agree with Friedman’s
statements. Cryptocurrencies are on the rise, especially with stories of people who bought
cryptocurrency back when it wasn’t popular and are now millionaires because of that. Rags to
riches stories like those entice consumers to buy and invest on the cryptocurrency craze. But I
think we can compare the cryptocurrency craze with the comic book boom of the 1990’s wherein
people collected comic books like crazy which lead to the value of the comic books going down
drastically. Do I think cryptocurrency is useless? No. I actually think it will become the default
mode of currency but I do see cryptocurrency dropping in value and popularity before it really
takes off. And I am not the only one that thinks this will happen.
Spencer (2017) points out that despite the popularity and positive price performance,
digital currency is not without risk. Friedman notes that leading investors such as Ray Dalio,
founder of investment firm Bridgewater, called Bitcoin a “bubble,” while Jamie Dimon, CEO of
JPMorgan, has criticized non-flat cryptocurrency, which is currency not backed by a
government. Before investing in cryptocurrencies, Friedman says that investors also should
consider several risks, including price volatility and regulatory intervention. “Expect continued
price volatility,” Friedman said. “Cryptocurrencies represent a new frontier. Therefore, retail
investors should expect volatility and significant price swings as markets develop. While
cryptocurrencies have experienced explosive growth, they currently remain a relatively small
part of the global financial ecosystem. Regulators and policymakers will continue to monitor
cryptocurrencies to determine any potential impact to financial stability or broader systemic
risk.” Royal and Voigt (2020) states that cryptocurrencies may go up in value, but many
investors see them as mere speculations, not real investments. The reason? Just like real
currencies, cryptocurrencies generate no cash flow, so for you to profit someone has to pay more
for the currency than you did. For those who see cryptocurrencies such as bitcoin as the currency
of the future, it should be noted that a currency needs stability so that merchants and consumers
can determine what a fair price is for goods. Bitcoin and other cryptocurrencies have been
anything but stable through much of their history. For example, while bitcoin traded at close to
$20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. In
September 2020, it was trading above $11,000. These disadvantages of cryptocurrency, such as
its instability in value, just support my theory that though cryptocurrency shows a lot of promise
and is the future of currency, it has a very rocky road ahead before it becomes the default mode
of currency. As Royal and Voigt (2020) states, this price volatility creates a conundrum. If
bitcoins might be worth a lot more in the future, people are less likely to spend and circulate
them today, making them less viable as a currency. Why spend a bitcoin when it could be worth
three times the value next year? This blocks cryptocurrency from having other people invest or
even buy it, and it makes cryptocurrency, now, as not a viable mode of currency.
Regardless of these disadvantages, cryptocurrency is still a great and innovative piece of
technology that has the potential to change the world. Having a decentralized and safe mode of
currency will elevate society as a whole but before we get to that future, cryptocurrency needs to
become stable. It has to work through a bunch of hurdles before it becomes the dominating
currency. So, the next time I am in the mall waiting to get the rest of my shopping done and I
overhear someone say they completed a payment using some sort of digital currency, I won’t
have the same sentiments as Spencer did. I’d say, “One day, one day everyone would be saying
that.”
Bibliography:
- Frankenfield. (2020, May 5). Cryptocurrency. Investopedia.

https://www.investopedia.com/terms/c/cryptocurrency.asp

- Royal, & Voigt. (2020, September 3). What Is Cryptocurrency? Beginners Guide to

Digital Cash. NerdWallet. https://www.nerdwallet.com/blog/investing/cryptocurrency-7-

things-to-know/

- Spencer, J. (2017, November 2). The Risks and Benefits of Digital Currency.

Entrepreneur. https://www.entrepreneur.com/article/302778

- Simplilearn. (2020, July 16). What is Blockchain Technology and How Does It Work?

Simplilearn.Com. https://www.simplilearn.com/tutorials/blockchain-tutorial/blockchain-

technology#:%7E:text=Blockchain%20technology%20is%20a%20structure,to%20as

%20a%20’digital%20ledger.