The Economic Impacts of Cryptocurrency
By Lauren MacDonald | October 27, 2022
Money. It’s a fundamental part of our lives, ingrained irrevocably in every facet of every day. Without it, we would be reduced to bartering, making transactions much less efficient.
Currency originally gained its value based on a tangible associated commodity. Then the explosion of paper money lightened pockets and eliminated the need for an associated value. As technology has advanced, the sophistication of the Internet has brought the ability to convert money into cryptocurrency, a futuristic advancement that can change the economy. But is that change a good thing?
Cryptocurrency operates much differently than our typical cash. Unlike the currency of the United States, cryptocurrencies operate without a central bank, relying entirely on blockchain technology to sustain it. Blockchain is the medium through which cryptocurrency survives. Any time someone requests a transaction, a complex mathematical formula is performed by a collection of computers in order to verify the user’s identity and their transaction. Once the formula is solved, the new transaction is stacked alongside other transactions, creating a new block of data. This adds to the blockchain and completes the transaction. Cryptocurrency is a great alternative to the fiat money that we most commonly use, but it does have some adverse effects to its existence.
In order to complete a new transaction, we say cryptocurrency is “mined”. The completion of a transaction uses massive amounts of energy because for every request, many computers compete to complete it first. Bitcoin, one of the most prevalent cryptocurrencies, generated more energy than the annual use of the entire country of Norway. Crypto mines burn coal and release huge amounts of carbon dioxide. Using all this energy also creates heat. These computers need an external way to cool down, requiring even more energy to power fans or air conditioners. This energy use is extremely detrimental to the environment, and sustainable alternatives are only in the early stages of development.
Cryptocurrency is an invention that has the potential to completely alter our world. Many are pushing for it to become a larger part of our everyday lives and to power ordinary transactions, but it’s impossible to ignore the negative consequences. As of now, fiat money is the preferred medium, but no one knows what the future of cryptocurrency holds.
Sources: https://www.nerdwallet.com/article/investing/cryptocurrency https://www.pwc.com/us/en/industries/financial-services/fintech/bitcoin-blockchain-cryptocurrency.html https://www.businessinsider.com/personal-finance/cryptocurrency-environmental-impact
Edited by Zachary Elias