Cryptocurrency: Bitcoin blazed trail for expanding technology



Christian Simmons

The cryptocurrency craze has blown up recently. You might know someone that has owned or mined a bitcoin, but there are hundreds of other cryptocurrencies.

A cryptocurrency is defined as “a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.”

The technology can be confusing, but at the end of the day, understanding the technology doesn’t matter for an individual user. Some basic qualities of any cryptocurrency include the fact that its decentralized, completely anonymous and can be “mined” on a personal computer.

Details of these characteristics are technical, but common among almost all cryptocurrencies.

In 2010, the value of a bitcoin was under a dollar. Bitcoin then exploded, being valued at about $900 for a bitcoin in the beginning of 2014. At its height, it was valued at $19,000 at the end of 2017.

This increase led to quite a few success stories, people made fortunes in the millions of dollars.

On the other hand, many lost money on the craze as well.

Today, the price of a bitcoin has fallen to around $8,000. To those that hopped on the bandwagon late, there have been massive losses.

The investors are not your typical older age retired investors. In a study done by Jeremiah Bohr and Masooda Bashir from the University of Illinois, they concluded that almost half of all bitcoin users were between 20 and 30 years old.

The study also found that 47 percent of the sample identified as Libertarian. This can be attributed to the party pushing for less government involvement in the affairs of the people. The study also said that “Progressives, Socialists, Centrists and Greens all have a notable presence in the bitcoin user community.”

“I think the younger generation likes the ease and lack of bureaucracy and lack of a middle man,” Tyler Jensen, assistant professor of finance, said.

Out of nearly 30 Iowa State students asked about bitcoin, only one had never heard of the cryptocurrency and about half had owned bitcoin or some other cryptocurrency at some point in their life.

College students might be too young to have bought in its infancy, but that doesn’t mean there haven’t been success stories.

While many of those students have either broken even or are still holding on, a couple of the students had sold and even made a profit.

At Iowa State, there is currently no research being done in cryptography, a field of math behind cryptocurrency, but Clifford Bergman, a professor in mathematics, has taught a class on cryptography in the past at Iowa State.

Bergman said that he did not believe bitcoin was going to take off, and said it was merely a “craze” as many experts in economics say.

Bergman recalled going to a conference in about 2009 and discussing the famous “Bitcoin: A Peer-to-Peer Electronic Cash System” paper by Satoshi Nakamoto.

The paper introduced the theory of cryptocurrency, explained the proof behind it and how secure it is.

Bergman said there was a lot of talk about who this Satoshi Nakamoto was, and some thought he might’ve even been at the conference.

While the paper was intriguing, Bergman pointed out that there wasn’t a large buzz about it in the math world.

Bergman said bitcoin used a lot of existing proven methods, but putting them together in a way that created a currency was something that had not been done before.

Many finance experts believe bitcoin is a fad. There is little belief in a currency that is not backed by a government.

Mocking the fact that bitcoin transactions can take up to five days to be approved, Yves Mersch, a member of the European Central Bank’s executive board, said “at these speeds, if you bought a bunch of tulips with bitcoin they may well have wilted by the time the transaction was confirmed.”

Mersch was speaking at a lecture in London in February about the evolution of money in the digital age.

While this is purely speculation by Mersch, there are some objective concerns as well.

Cryptocurrencies, because they are not backed by anyone including the creator, cannot be traced.

Drugs, sex, weapons, hitmen and even people have been exchanged for cryptocurrencies on anonymous marketplaces such as Silk Road.

All purchases on Silk Road were made using bitcoin due to the inability for governments to track the flow of the currency, meaning there is less of a paper trail in the transaction.

While many believe the currency only has relevance in this world of illegal trade — some even believing the currency should be outlawed — there is a case for its legitimacy.

Roger Ver is the former CEO of Memory Dealers and a firm believer in cryptocurrencies.

“I will proudly continue to promote bitcoin full time because I see it as the best chance the world has ever seen at creating a more peaceful society in which all human interactions are voluntary, and outside groups of people calling themselves the state are no longer able to violently interject themselves into the affairs of others,” Ver said via his YouTube channel.

While Ver was CEO of Memory Dealers, the website only accepted bitcoin as payment for its memory. Ver never exchanged it for money, instead holding on to the bitcoin, solidifying his belief in the currency.

While bitcoin blazed a trail of a new type of currency, there were a few problems.

The long transaction times, the high transaction fees, the fact that only about 21 million bitcoin will ever be able to exist, and the volatility of the value increase doubts in its practical applications.

To fix these problems, hundreds of other cryptocurrencies have begun that aim to fix the problems bitcoin has, such as ethereum which aims to lower transaction times to as little as three second and fees of under 20 cents.