crypto

You've probably heardstories of young investors lured by the promise of quick gains in the world of"crypto," or crypto currency. And while it's Bitcoin that gets thelion's share of attention, there are over 10,000 digital currencies in use today.There are the big names, like Ethereum, Binance, and Ripple. And then there arecurrencies like Dogecoin and Loser Coin, which started as jokes. If you're confusedby the hype, you're not alone. So just what is cryptocurrency? According to Investopedia:

A cryptocurrency isa digital or virtual currency that is secured by cryptography, which makes itnearly impossible to counterfeit or double-spend. A defining feature ofcryptocurrencies is that they are generally not issued by any centralauthority, rendering them theoretically immune to government interference or manipulation.

Because they aren'tcentrally regulated, cryptocurrencies are touted for one major advantage: fundscan be transferred directly between two parties.

There's no need foran intermediary or third party such as a bank or a credit card company. Andthis is made possible by a transformative technology called blockchain.Techbullion defines blockchain in this way:

Blockchain is adecentralized ledger operating in a decentralized system, unlike the bankingsystem where all transactions are centralized and maintained by a singularauthority. Blockchains can be interpreted as databases that are infinitelyscalable due to the nature of their design. The individual cells in thedatabase are blocks that can be filled with data. Once the block is full,

it is connected tothe previous block to make a chain.

Unlimited blockscan be attached, forming a blockchain.

So is the worldready for virtual currencies? Early activity was dominated by people on the fringeof the digital economy. And much of the current energy is created by outsizedpersonalities like Elon Musk, whose pronouncements are often viewed withskepticism. It appears, however, that we've crossed a threshold of acceptance,as crypto values increase. As Bull and Bear notes:

Much of the recentincrease in cryptocurrencies value is driven by large financial institutions'newfound acceptance of the technology as a viable investment.

The CEO of JPMorgan, Jamie Dimon, went from calling Bitcoin a "fraud" in 2017 toallowing clients to access Bitcoin funds in March. Legendary hedge fund manager

Paul Tudor Joneshas used bitcoin as a hedge against inflation, and CitiGroup claimed in a March2021 report that Bitcoin was "at the tipping point" of going mainstream.To top it off, El Salvador made Bitcoin legal tender in June, becoming thefirst country to do so.

Of course, governmentsget twitchy when novel investment vehicles start taking off. And because cryptocurrencytransactions may be anonymous or semi-anonymous, they could be attractive tocriminals. For these reasons, there's lots of talk of regulation. In the

U.S., Gary Gensler,the chair of the U.S. Securities and Exchange Commission or SEC, has taken afirm stand.

As the Guardianreports: Gensler said on Tuesday that the crypto market involved many tokensthat may be unregistered securities and left prices open to manipulation and millionsof investors vulnerable to risks. "This asset class is rife with fraud,scams and abuse in certain

applications, Genslertold a global conference. "We need additional congressional authorities toprevent transactions, products, and platforms from falling between regulatorycracks.

Concerns about cryptocurrenciesare not limited to the financial and criminal risks. There are environmental implicationsto mining crypto, which depends on vast networks of computers consuming vastamounts of energy. By verifying transactions and adding blocks to theblockchain, miners can earn currency themselves.

But thisresource-intensive activity is sullying crypto's reputation, as CNBC reports:

Bitcoin's poorenvironmental credentials have made it a controversial asset at a time whensocial and environmental responsibility have become top of mind for investors.In May, Tesla CEO Elon Musk said he would stop accepting bitcoin for vehiclepurchases unless miners transition to more sustainable energy.

The jury is out onwhether people in the future will be buying their groceries with Bitcoin.Perhaps cryptocurrencies won't become a common medium of exchange but just a formof investment. And there are certainly many investors thinking now is the timeto jump on the bandwagon if you want to make a killing. But will it last? Willthe investment pay off? According to Stuff.com:

The basic premiseof cryptocurrencies that there will only ever be a limited amount, is simplynot true.

Bitcoin may have afinite number of coins mined, but other cryptocurrencies are popping up all thetime. And some major ones, like Ethereum, have a potentially unlimited supply.So while membership to one crypto club, bitcoin, might be restricted, if thereare other similar clubs opening up down the road, how can it stay exclusive?When there are tons of something around, it's usually not worth much.