After the collapse in the markets in September 2008, there was thirst for something new and alternative in the world of finance. A manifestation of this desire for radical change came a year after the crash with the invention of Bitcoin. Since then, there’s been a huge amount of development in the cryptocurrency space. Other cryptocurrencies such as Litecoin, Ethereum, Dash, BitConnect, Ripple, to name but a few, have flooded the market and raised a lot of money recently.
Cryptocurrencies have been able to do this through their own kind of IPOs, known as Initial Coin Offerings (ICOs), and they have been a hot topic of conversation lately. Cryptocurrency start-ups are using ICOs to bypass the traditional regulated capital-raising route by selling a certain percentage of their cryptocurrency to early backers using fiat currencies or Bitcoin itself, much like how IPOs function.
And of course, like with anything new and different, cryptocurrencies and ICOs have come under intense scrutiny.
Since Bitcoin’s inception, there has been a lot of mud thrown at cryptocurrencies – problems including their fees being too low (or high), website interface problems, the lack of interest rates, and the overall price/worth of the currency. However, the common and major thread is that it they are often regarded as Ponzi schemes used for and by criminals to scam people through ICOs, as these currencies are effectively unregulated. Yet recently, the Securities and Exchange Commission (SEC), which regulates the New York financial markets, has been coming out to define cryptocurrencies as securities.
Backlash & Criticism
So it appears that the nay-sayers have been defining cryptocurrencies from the get go. Yet a lot of the criticism that is levelled against cryptocurrencies seems to be from a misunderstanding of them. For instance, blockchain technology gets conflated with Bitcoin itself, but they are two different things; blockchain is the ledger for cryptocurrencies and Bitcoin is the currency.
And the criticism that cryptocurrencies are not centralised and have no regulator fails to see the nature of cryptocurrency; that it is decentralised as part of the overall concept. This is what makes it appealing to a lot of people, as they like to rebel against centralised systems such as the Federal Reserve, because they think these systems have failed society. They feel free with Bitcoin. But maybe the fact that cryptocurrencies are decentralised in nature leads to their failure to define themselves in the minds the public.
It doesn’t help that cryptocurrency as a system is constantly changing too. Just recently ‘Bitcoin Cash’ has come into the fray, splitting itself from Bitcoin’s software so that Bitcoin holders have the option to trade their Bitcoin for fiat currencies or other digital currencies. This is yet another milestone for a currency that still in its very early stages.
Yet the media is still asking what exactly Bitcoin is, along with other cryptocurrencies, so possibly these new developments, every new step, is an opportunity for cryptocurrencies to define themselves. If cryptocurrencies want to survive in the future they need to convince society to invest in them, and that starts with being able to define themselves properly.