Cryptocurrency has a 2 trillion USD market cap. It cannot be ignored by any investor or nation today. In order to see how cryptocurrencies will shape our future, let’s look at the advantages and disadvantages of cryptocurrency. Identifying the principal features of crypto will help us perform a better forecast as to what the future holds.
Advantages of Cryptocurrency, DeFi, and Smart Contracts
Critics see a huge risk.
Advocates see limitless potential.
Both are right.
The first thing you should know when you invest in a crypto, is that you can end up losing all your money, or getting a massive profit. The asset is too volatile to give clear guarantees for the future.
Power to the People
For the first time in the history of the world, someone with enough initial capital can run an ICO and start a crypto coin as a potential high-value investment (buy at the bottom price, if it takes off you’ve substantial profit.
The decentralization of creating money, adding money, creating new crypto coins is a radical departure from anything the financial world has ever seen before. Earlier only kings and governments could issue tokens.
Now anyone can do it and should do it. But beware – its is estimated that fully 50% of current ICOs are scams. The lesson - DYOR (Do Your Own Research). So we have money without a normal limit. Anyone with any collateral and enough technical know-how can launch a crypto-coin. But that’s just a tiny fraction of the possible applications.
2. Smart Contracts
Money is just the tip of the iceberg. The tip of the tip. Smart contracts are what gives crypto its real superpowers. For the first time in history, there now exist a way to perform transactions without a centralized entity. The execution of the smart contract once both transacting members agree is guaranteed by the platform.
This means we no longer need a bank or a centralized system for finance. That single sentence can turn the world on its head. Smart contracts eliminate the need for taxes, financial fees, fixed interest rates, static nature of an economic system and transaction fees for any kind of action. We are free from controls.
This freedom is seen by some as a wealth of limitless potential. We could wipe out poverty, save the environment, stop global warming, encourage electric cars, simply because we can mint money. This system has the potential to become a new utopia. However, it must be also understood that this system is so powerful that t could be hugely abused and result in global disasters like uncontrolled Bitcoin mining, power being given to single entities who will not act ethically but greedily.
Already, Monero (XRM) is the worlds first completely anonymous payment medium and is used for most payments on the Dark Web. For the price for 1000 units of Monero, hackers can deposit controversial pornographic images in gigabytes on any personal computer connected to the Internet and anonymously tip off the police.
The chances for misuse are also limitless. The next five years will dictate the future of the world’s cryptocurrencies and the world economy. We trust that things will work out for good and that such criminal actions may be isolated and rare counter-examples to the general case.
3. Decentralized Finance (DeFi)
To fully understand DeFi, we need to understand that smart contracts form immutable methods to transactional integrity. This means that lending, staking, mining, futures, the share market, any system which is used in traditional finance has a corresponding use-case inn DeFi. There is also scope for systems that are impossible on traditional finance platforms. For example, individuals in third world countries like Somalia, Ethiopia and the poorest sections of society in even developed countries can invest in a huge amount of capital with just an Internet connection. It goes further.
We can eliminate the banks, lending companies, finance companies, investing companies, and merely use some set of regulations to govern the unified world economy. Some cryptosystems like Stellar do exactly that. Crypto is universal currency.
Once it is adopted, everything will change. Into what? We hope a united, peaceful, democratic, friendly, equitable and fair economic system to rise up in the world. In our worst nightmare, the exactly opposite can happen. Which is why I say that the next five-ten years are critical to the future of the global economy and the planet itself and to the future of our race.
4. Tokenization
Now this Is where the real money lies. Through security tokens and fractional ownership tokens, every asset in the world, both digital and non-digital and be converted into liquidity (fiat money). The estimated total tokenization value is the 5 trillion that we spoke about. In a small way, Non-Fungible Tokens (NFTs) being auctioned have set the stage. Now everything virtual or real, online or offline, can be treated as a token and given a value according to the free market demands. This is really, really, huge.
The crypto revolution will create many millionaires and even billionaires. Care must be taken to ensure that this financial wealth reaches all corners of society. Otherwise, we could end up as a highly polarized, financially disabled, and financially corrupt society. This journey is full of risks. But in one way, that’s why people find it so attractive an idea and a possible future.
So, we have seen four major advantages of the crypto world.
Now we’ll have a short view at the dark side – the disadvantages.
Supporting criminal activity
Bitcoin and cryptocurrency, especially Monero, is now the only payment the criminals ask for. Because Monero is a completely anonymous system, it is hugely popular both for criminal transactions and money laundering and so much more. In one way, crypto is the financial lifeline of both parties in the currently ongoing Russia-Ukraine war. Without regulation, things can go completely out of hand. And on the Dark Web (never go there, it’s illegal in a number of countries, including India), crypto is the de facto form of payment. So one very big problem is that cryptocurrency enables the finance of nearly all the criminal activity in the world.
2. Super-powered hackers and Hacking Groups (State-sponsored sometimes)
The cybercrime department of the USA has identified several hacking groups, all operating outside written law, some sponsored by the countries in which they operate (USA, China, North Korea are infamous examples) One group even has as its name ‘Anonymous’. You will understand the superpowers of these hackers when you understand that they have the codes to the defence and infrastructure technology in nearly every country.
No system is hacker proof. No matter how much security you provide, it is also a question of when the hackers get in, not if the hackers get in. We live in an ultra-fragile bubble of a world. There is even a published book by Nicole Perlroth that documents the hacking of the worldwide defence systems. We are at their complete mercy, as far as the hackers are concerned. What can we do?
One solution is a non-stop continuous flurry of research in which hacking is done and gain the support of enough white-hat hackers to control the amount of power a hacker group can control. White hat hackers are our lifeline.
Big tech companies like Google, Microsoft, Meta (Facebook), IBM, Amazon, etc, routinely pay millions of dollars to white-hat hackers who crack existing security and are public about it by giving the hacked company all the details of the security hole. It is not uncommon for white-hat hackers to make well over one million USD per month.
3. Possibility for malicious parties to dominate the world
We often assume that the people at the heart of crypto have good intentions and are not evil in nature (Google’s famous Don’t Be Evil – DBE). But even Google has been acting with questionable decisions over several of its latest products. There is a saying – power corrupts. Absolute power corrupts absolutely. We are already seeing this happening in the Ukraine-Russia war. If an entity which seems to be harmless but has malicious intentions, they could control, dictate, and dominate the entire world of crypto, including DeFi.
This is one of the many very important reasons that regulations have to be introduced. There has to be minimal, but a democratic centralized aspect of control. People who gain power without morals could create a nightmare and a tragedy of a society. We need to guard against this. Hence the need for a worldwide governing body, worldwide regulations, cross-border international laws. But these are not yet in place. They need to be implemented, ASAP.
Reflection and Takeaways
Cryptocurrency will dominate the world. But it is a world with very fragile constituent parts. Hackers pose an immeasurable risk. Despite blockchains being touted as hackerproof and secure, more money has been stolen from blockchain entities than any other sector of finance in the world. Sometimes the hackers have made off with over 100 million USD (Mount Gox).
What should crypto developers and decentralized exchanges focus on as a result? Ethics. For the crypto to work we need leaders with strong morals. As impossible as it may seem, it is truly the only possible solution. Or we need to create an international body that regulates cryptocurrencies worldwide through a democratic mechanism.
There Is no other solution. This needs to happen. Hacking the apt places could destroy the entire world in seconds. We need action. We need control. We need ethics. We need strong moral fibre.
However, as we very well know by the history of powerful ruling classes from King Solomon in the Bible to the Communist countries of the 20thcentury, power corrupts. There needs to be great care and thought about our governance and regulation of cryptocurrency.
We have to maintain decentralization while providing a measure of democratic centralized control. We can do that. In fact, Tezos and Hedera Hashgraph have already created such consortiums that through democratic methods, oversee the operation and the financial security and valuation of their token. This is exactly what we need, but on a global scale.
I envision a global consortium of all nations with representatives from every country in the world to participate in a democratic governing body. I argue that if such a body is not created as fast as possible, we may face dictatorial governance with the maximum power being given to the entities with the greatest financial valuation.
We cannot guarantee the behaviour of a monopoly economy – just remember Netscape Navigator and Microsoft Internet Explorer. Every time, people look at money selfishly and not fairly. And they will do any legal action to maximize the amount of money they make. If this is the attitude of the governing body, the future could be dictatorial in nature and disastrous for all countries without crypto.
Conclusion
Every crypto developer needs to be aware of these fundamental truths, and their own ability to take a stand and make a difference in a very corrupt world to ensure fair distribution of resources. If we do not have a democratized central control, we could end up with monopolies by oligarchies – the rich and the powerful. Just look at the situation with Airtel, Idea, Vodafone, and Jio.
Through the power of liquidity and the advantage of having seemingly an endless flow of cash, Airtel has collapsed, Vodafone and Idea have merged to from VI, and Jio is dominant and still continuing to expand. If that happens to the crypto world, and you are an Airtel business employer or representative, things could get very ugly very fast. People show no mercy. Money is the primary motivation for everything.
This situation needs to be addressed. Crypto is set to dominate the world. The future of the world rests in the hands of those who are working in cryptocurrencies. We need to show ethics, morals, and fairness. Unfortunately, that never happens in business.
And crypto is business. We can have a heavenly future of justice or a hell of monopoly by 0.001% of the world’s population controlling 99% of the world’s financial resources. The future literally lies in the hands of every cryptocurrency user reading this article.
I hope your minds are now open to the limitless – and some of the dangerous – possibilities of the future.
Until next time –
Enjoy crypto!