It’s an enigma that divides opinions into two camps: those who see it as a genuine revolution, and those who decry it as a modern-day pyramid scheme.
So, where does the truth lie amidst the digital coins and blockchain technology? Cryptocurrency’s validity and value can’t be denied. It’s more than just a virtual gold rush; it’s a paradigm shift in how we perceive and interact with money.
Born with the advent of Bitcoin in 2009, cryptocurrency offers a decentralised and transparent alternative to traditional currencies. It’s a technology that leverages cryptography to secure transactions and verify the creation of new units. Advocates argue that cryptocurrency is, at its core, a response to a broken financial system. The 2008 financial crisis eroded trust in traditional institutions, spurring the search for alternatives.
Cryptocurrency emerged as a beacon of hope — a form of currency governed not by banks or governments but by a distributed ledger, the blockchain. Moreover, cryptocurrency promotes financial inclusion.
Millions of unbanked or underbanked individuals globally can now access financial services through a smartphone. Remittances, once mired in hefty fees and bureaucracy, have been streamlined. No longer is access to the global economy a privilege of the few; it’s a right for the many. However, the world of cryptocurrency is not without its shadows. Skeptics point to the speculative frenzy that often surrounds it. The volatility of digital currencies, with prices soaring to stratospheric heights one day and plummeting the next, has raised eyebrows.
Critics liken this rollercoaster to the pyramid scheme’s modus operandi, where early investors reap rewards at the expense of latecomers. The crypto market’s Wild West atmosphere is another point of contention. It’s a space with little to no regulation, making it a breeding ground for scams and frauds. Pump-and-dump schemes, fake Initial Coin Offerings (ICOs), and Ponzi schemes have siphoned off fortunes from unsuspecting investors. To add complexity, the inherent anonymity of cryptocurrency transactions can be a double-edged sword. While it offers privacy and security, it’s also an open door for illegal activities like money laundering and tax evasion. So, is cryptocurrency a legitimate financial evolution or a pyramid scheme dressed in digital clothes? Here I will pause and reminisce about my formative years in nursery school.
One of my favourite activities was story time. In that tiny realm of wonder, my young and eager mind soared, effortlessly transported to a realm of enchantment where imagination reigned supreme, and the boundaries of reality melted away. In these tales, valiant knights, fuelled by an unquenchable fire of determination, battled fierce and untamed monsters while simultaneously capturing the hearts of impossibly exquisite princesses. These narratives were the bridge to a land where the “Happily ever after” path beckoned, guiding each story to its deeply satisfying conclusion. But let us not forget that not every tale finds its resolution beneath the radiant sun; what of those narratives that dared to venture into the shadowed depths, where hidden beasts lurked, poised to plunge the world into unending darkness? My enduring passion for epic sagas persists to this very day. Now, allow me to reverse the roles and weave a narrative for you.
Whether it unfolds as a whimsical fairytale or delves into the depths of horror, I leave that choice entirely to your interpretation. Sam Bankman-Fried, (currently in jail awaiting trial) the founder of failed cryptocurrency exchange FTX was asked by columnist Mark Levine about how crypto could work. Here is his response. You start with a company that builds a box,” Bankman-Fried said. “They probably dress it up to look like a life-changing, you know, world-altering protocol that’s gonna replace all the big banks in 38 days or whatever. Maybe for now actually ignore what it does — or pretend it does literally nothing.” Bankman-Fried explained that it would take very little effort for this box to issue a token that would share in the profits from the box. “Of course, so far, we haven’t exactly given a compelling reason for why there ever would be any proceeds from this box, but I don’t know, you know, maybe there will be,” Bankman-Fried said.
Levine said that the box and its “Box Token” should be worth zero. Bankman-Fried didn’t disagree. But he said, “In the world that we’re in, if you do this, everyone’s gonna be like, ‘Ooh, Box Token. Maybe it’s cool.’” Curious people would start buying Box Token. And the box could start giving out free Box Token to anyone who put money inside. Crypto (Box Token) investors would see they could earn a higher yield by putting their money in the box than in a bank. Before long, Bankman-Fried said, the box would be stuffed with hundreds of millions of dollars, and the price of Box Token would be rising. “This is a pretty cool box, right? Like, this is a valuable box, as demonstrated by all the money that people have apparently decided should be in the box. And who are we to say that they’re wrong about that?” Sophisticated players would put more and more money in the box, Bankman-Fried said, “and then it goes to infinity. And then everyone makes money.” And while Bankman-Fried conjured that fairytale from literally nothing, there was no happily ever after conclusion. The entire pyramid came crashing down. Beware.
