quo vadis, cryptocurrency?

bitcoin, ethereum, litecoin, dogecoin, ripple — those nouns preserve to remain famous in cyberspace. a informal google look for “bitcoin” returns about 2.five billion outcomes, and as cryptocurrency costs have remained unstable because the start of 2022, they possibly want no similarly creation. their decentralised and unregulated nature has attracted a split opinion on their legality with same numbers for and against their persevered lifestyles (and proliferation). monetary regulators and financial government, but, remain cautious — justified, to a big volume — out of fear of money laundering and different unlawful global capital movements. people have a tendency to fear what they do not recognise or can’t manage, that is why it is unsurprising that china, qatar, turkey, bangladesh, egypt, morocco and some 50 other countries have either banned or limited the use of cryptocurrencies. history, but, indicates us that prohibiting some thing is a certain-hearth way of piquing greater interest. so, as opposed to make another feeble try at warning the public, i try and solution a greater pertinent query: is there a realistic use for cryptocurrencies?

currently, maximum cryptocurrencies are used virtually as a medium of alternate for digital transactions. their sky-excessive costs have additionally driven a growing range of traders to don’t forget cryptocurrencies as a feasible alternative funding asset. the latest crash in cryptocurrency prices, but, has compelled many to reconsider its viability as an investment. in that case, what different purpose do cryptocurrencies serve?

considering early 2022, malaysians were an increasing number of involved (rightfully or otherwise) with the plummeting ringgit in opposition to the united states greenback and the singapore greenback. numerous experiments have shown that volatility in the forex (forex) markets can, in reality, be beneficial to investors thru clever construction of portfolios. a common method to hedging forex volatility is through currency derivatives or rebalancing forex portfolios with the aid of adding gold into the mix. but, marketplace accessibility to gold is particularly restrained. although there are no worldwide laws governing gold, home gold markets are especially regulated. in a recent examine published within the magazine of risk finance, i confirmed how the secure-haven and hedging residences of gold may be emulated by which includes quite a number cryptocurrencies in a forex portfolio, effectively compensating the investor for extra threat undertaken. understandably even though, this would simplest be useful to a pick institution of finance specialists.

perhaps we’d see more mainstream adoption of cryptocurrencies if they have been used because the virtual alternative of cash stored in e-wallets. inside the present day iteration of e-wallets, sensitive non-public identifiers and banking statistics stay prone to hacking and exploitation if the e-pockets issuer’s security structures are compromised. the blockchain structure underlying cryptocurrencies and their associated cryptographic wallets introduce a further layer of security and anonymity, making it less prone to unauthorised get entry to. this, however, is still a longshot mainly in malaysia, as a result of the present day demanding situations of traditional e-pockets use, as highlighted through my esteemed colleague in an earlier piece published on this identical column (see “covid-19 and e-wallet usage in malaysia”, the edge, july 18, 2021)

we can also think a bit larger. some countries, such as el salvador and the principal african republic, have formally followed bitcoin as their countrywide forex, in preference to traditional important bank-issued notes. proponents of the flow argue that doing so liberates the us of a from undue foreign have an effect on on their financial system since the deliver and price of (crypto)currency is not determined via centralised policy and foreign exchange markets. because of the decentralised structure of cryptocurrencies, these proponents additionally argue that the fee of the countrywide forex may be market-determined and mirror its authentic honest value. while these may additionally theoretically, and to a point, be almost authentic, for the reason that cryptocurrencies came into being, the markets have seen numerous instances of crypto “whales” (this is, “marketplace makers”) with enough cash to single-handedly move massive volumes of cryptocurrency in an instantaneous, inflicting big shifts in prices. up to now, the identities of these “whales” have by no means been determined. so, even as the state can be insulated from outside political affect, its economy is susceptible to nameless marketplace manipulation.

what then, can we do with cryptocurrencies? rather than trying to extract financial price or practical use, a more profitable endeavour could be to explore in addition use of the underlying blockchain shape to refine and enhance current (economic) services, specially in terms of safety and transparency. as the use of a blockchain structure generally requires adjustments on the structures in preference to the cease-consumer degree, there will likely be little to no resistance from consumers in its adoption. in spite of everything, in cutting-edge times, who wouldn’t admire improved safety?

so, in which can we go? as i often tell my doctoral class, “that, is virtually up to you.”