The Facts and Promises about Cryptocurrency
Bitcoin and Ethereum can stand out in the Advance digital world of 2023
Even after ten years, financial institutions, governments, and centralised agencies do not recognise Bitcoin as a global medium of trade. The European Union has cautioned the public against investing in cryptocurrencies, claiming that doing so is extremely dangerous, speculative, and inappropriate for the majority of retail customers as an investment, method of payment, or medium of exchange.
But what exactly is wrong with cryptocurrency, you ask? The reason is straightforward: The Bitcoin economy is monopolised by a small number of businesses and lacks decentralisation.
In 2009, Bitcoin (BTC) was introduced. Before that, on November 1, 2008, a person using the pseudonym Satoshi Nakamoto wrote in an email to a mailing group for cryptography: "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party."
In his white paper, while describing Bitcoin, he asserted that it is a decentralised currency that operates without the aid of a bank or other reputable financial organisation.
The amount of transactions recorded in the blockchain over the first year or years, however, shows that little interest in Bitcoin emerged during those years. People became interested in Bitcoin later on when huge payouts in BTC — up to 10x, 100x, and even 1,000x — were made via the gambling website SatoshiDice DApp.
It seems false to believe that no person, group, or entity can control the price of Bitcoin.
In June 2012, this gaming website saw a spike in activity that saw daily transactions reach over 60,000. As a result, the Bitcoin blockchain receives hundreds of new transactions, the majority of which are related to the usage of Bitcoin for gambling. Following that, Bitcoin's popularity grew as a result of its open-source design and wider acceptance by the global population.
Despite the early assertions, some studies contend that Bitcoin is not a decentralised currency; mining pools are among the groups that dominate the Bitcoin economy. The majority of computing power is held by mining pools, which, if they band together, might manipulate transactions on the Bitcoin blockchain.
More specifically, a chance snapshot of Blockchain.com's statistics on the market share of the top bitcoin mining pools on August 5, 2022 reveals that six mining pools have 55% of the computing power. When the statistics for the entire year were examined, this control rose to almost 65 percent. This suggests that the majority of the wealth and power are held by a small number of miners.
Bitcoin prices are influenced by cryptocurrency exchanges, which manage supply and demand. One recent instance is Celsius Network, a private company that lends cryptocurrency and has just frozen withdrawals and transfers from 1.7 million of its customers' accounts. The price of Bitcoin and Ethereum dropped by 60% as a result of this action.
This goes against both the promises made by Bitcoin and the decentralisation tenets. Furthermore, wallet service providers have the power to control your Bitcoin and influence Bitcoin pricing.
According to a study titled "Characterising Wealth Inequality in Cryptocurrencies," more than 58.21 percent of all Bitcoin addresses contain Bitcoins. Since 20% of the population controls 80% of the wealth in real-world economies, Bitcoin too follows this Pareto distribution pattern.
Cryptocurrencies, however, are worse than traditional economies. According to a research that was also mentioned in the New York Times and titled "Cooperation among an Anonymous Group Protected Bitcoin During Failures of Decentralisation," the majority of the Bitcoin was mined for two years, from the time of its introduction until its price reached $1. This again runs counter to Bitcoin's egalitarian promise.
In an ideal world, everyone would be able to take part in Bitcoin mining and profit from transaction fees and mining rewards. The odds of a regular person succeeding in the cryptographic problem are, however, extremely slim because of the elevated hash Rate [a measurement of the computational power utilised to mine and process transactions on a proof-of-work blockchain network] and the dominance of mining pools. As a result, the future of Bitcoin is not in the hands of the common person.
Economists contend that cryptocurrencies cannot be used as a store of value or a means of trade due to its extremely speculative nature. Most importantly, Bitcoin is only an entry in the Bitcoin ledger and has no intrinsic value. It also does not exist digitally. To put it simply, when Alice transfers Bitcoins to Bob, just a transaction-related item in the distributed ledger is updated.
Transactions display the ownership rights of Bitcoin and are clearly traceable via the publicly accessible ledger of Bitcoin's Unspent Transaction Output (UTXO) and Spent Transaction Output (STXO).
Because the government does not support cryptocurrencies, there is no financial services ombudsman in place. If you invest in cryptocurrencies and lose, you may lose a sizable sum of money—or possibly your entire investment—and you'd have nowhere to turn to defend your customer's rights.
One should be wary of such biassed marketing concerning cryptocurrencies because social media influencers have their own financial interests at stake. In addition, one should exercise caution due to the prevalence of frauds and bogus crypto assets. Even creating one's own coin is possible. According to certain studies, people who possess black money use cryptocurrency to transform it into white money. Cryptocurrencies can potentially be used to launder money because Know-Your-Customer regulations do not apply in this situation.
Even while Bitcoin presently has a market capitalization of over $400 billion and is one of the two most valuable cryptocurrencies, along with Ethereum, it is still mostly utilised for investment and gambling rather than as a medium of trade or payment.
Because it enables direct money transfers and overthrows the dominance of governments, centralised authorities, and financial institutions, Bitcoin was the hope of many. However, a small number of organisations dominate Bitcoin's economy. The assertion that no government, organisation, or individual can manipulate a cryptocurrency's price or have an impact on Bitcoin prices appears to be false.
