It is often claimed that the wheel is the greatest invention of all time. It pioneered greater mobility and allowed travel over long distances. However, inventions like the internet must now have significant weight in the discussion for the greatest invention ever made. It has successfully infiltrated almost all areas of our lives. From security to communication, everything is now done through the fifth domain. With the internet’s involvement in our daily lives, it is no surprise that the fifth domain is slowly emerging as an incredibly feasible outlet for commerce and finance. While e-banking remains incredibly popular, crypto-currency is the wave. The past year has seen crypto-currency become more and more popular.

By definition, crypto-currency is multifaceted and complex. In the simplest terms, it is a medium of exchange on the internet. It is a digital asset that is globally recognised as currency which buyers may use at any compatible site. It is called crypto-currency because all transactions are strongly encrypted to avoid fraud/ counterfeiting. Crypto-currency is also decentralised. This means that it is not tracked by banks and doesn’t leave significant money trails. Crypto-currency is both extremely similar and very different from regular currency. It is similar because most rules of economics apply to the valuation of crypto-currency. It rises and falls based on its stakeholders and people invest into crypto-currency as an asset. However, crypto-currencies do not follow some of the rules of other currencies. As mentioned before, they are decentralized. This means that they can provide anonymity. They are also based on a public block-chain which keeps track of transactions. Furthermore, there are many types of crypto-currencies all operating with different stakes and at different valuations. Bitcoin is the oldest and the biggest crypto-currency in terms of users.

The past year has seen crypto-currency become more and more popular and the trend seems to stay on the up.

What do these users do, though? What are the uses for crypto-currency? More importantly, what can a crypto-currency do that regular currency cannot? Well, for starters, anonymity plays a huge part. Crypto-currency allows its users to stay quieter while making controversial or even criminal transactions. Governments might use it for confidentiality. As explained previously, crypto-currency can also be something to invest in. As the value of the currency is always changing, there is always an opportunity (and a risk) with regards to the investment. Some businesses are now accepting payments using crypto. A major company that has discussed its use is Elon Musk’s Tesla. Another major use of crypto-currency is as non-fungible tokens (NFTs). These are the equivalent of collector items on the internet, each having a unique digital signature that cannot be changed or removed. Several artists have turned their art into NFTs that sell for large amounts of money because they are unique.

Despite a lot of discussion crypto-currencies are not very accessible. They are used mainly by the uber-rich. In Nigeria, 32 percent of the population claim to have used some crypto-currency. Only 6 percent of the people in the USA have made similar claims. There is clearly a divide in the use and laws of various countries on crypto-currency. China has had a major crackdown on crypto-currency, showing that some states might not agree with the rules set by block-chain transactions.

Crypto-currencies also have a lot of drawbacks. First, crypto-currency mining is a huge drain on electricity and its effect on the environment is harmful. Crypto-currency mining is an extremely taxing task, mostly done by purpose-built hardware. That hardware too becomes obsolete every 1.5 years on average, causing even more electronic waste. The anonymity of block-chain also creates a problem for the governments trying to regulate the economy and maintain security. There have already been many frauds in the crypto-currency market, costing investors millions of dollars. While more opportunities to use crypto-currencies are likely to open, at the moment there relatively few businesses are using them.

Crypto-currency are still in their infancy. They will probably see several highs and lows before they become predictable.

The writer is a student at LUMS and a reporter for The LUMS Post