Money of the future?

Cryptocurrency changes its course

Mason Cooney, Copy Editor

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Although Bitcoin is known as a potential moneymaker since it gained value by thousands of dollars in 2017, the currency was originally meant to be another form of money — the kind to pay for your Starbucks.

Bitcoin, created by an entity under the name Satoshi Nakamoto, was introduced in 2009 as a form of electronic cash that users could trade without going through financial institutions like banks. The digital payment system has since strayed from its original purpose, according to Tanaya Macheel ’08, Fintech and crypto reporter at Cheddar, a livestreaming financial news network.

“Most people that are using Bitcoin are just using it as a store of value rather than a form of cash that you use to pay for everyday things like coffee,” Macheel said. “A lot of people just like to hold onto it because they’ve heard about these price run-ups in the past.”

The value of Bitcoin dramatically surged in 2017, with the price of one bitcoin equalling nearly $20,000 in December from $900 in January of that year, according to Coinbase. The rise attracted investors but left many others hesitant about Bitcoin’s price volatility, according to Macheel.

“Watching the price of Bitcoin fall is not the same thing as watching a company’s stock fall,” Macheel said. “The smartest people in Bitcoin do not know what drives the rise and fall of prices, so I think everyday consumers get really afraid when they hear the negative coverage of Bitcoin.”

Cryptocurrencies like Bitcoin eliminate the need for middlemen and verify transactions through a blockchain network, a public ledger of every transaction that cannot be modified. This decentralized approach prevents double-spending but requires every computer in the network to approve a transaction before it can proceed, according to the International Monetary Fund.

Hundreds of altcoins — alternatives to Bitcoin — have subsequently emerged, such as Litecoin, Dogecoin and Ethereum, but no cryptocurrency — including Bitcoin — has become mainstream.

Macheel said the main reason for the lack of widespread adoption is most people do not know enough about cryptocurrency.

“It’s like looking at the early days of the internet,” Macheel said. “Thirty years ago, the internet was still this sketchy thing where people were afraid of getting scammed, and look at what the internet has become today. We’re in the really early stages of this new technology and there is definitely an education gap.”

Economics teacher Angelica Allen has begun to bridge this gap for seniors in her economics elective. During a class on cryptocurrency, she phoned in two guest speakers from a cryptocurrency firm and had students ask questions.

“I thought it was important for my students to understand economics from a very real-world perspective,” Allen said. “Learning about cryptocurrency, Bitcoin and all of these new emerging forms of monetary trade, is really important to understand as a concept, especially living in San Francisco where you’re at the heart of emerging economies.”

Senior Wellsley Cohen, who learned about cryptocurrency through Allen’s class, said she finds it fascinating but not useful in everyday life.

“I see potential for cryptocurrency in the world of large business transactions,” Cohen said, “but for someone like me, who uses Venmo to pay a friend for an Uber or cash to pay for a snack, I don’t see cryptocurrency as being necessary.”

Consumers like Cohen are part of the reason why cryptocurrency has yet to become mainstream, according to Macheel.

“If I went to my corner coffee shop, I probably could not pay for my coffee with Bitcoin because the merchant’s going to say, ‘No we only accept U.S. dollars,’” Macheel said. “It’s sort of our chicken and egg problem because what would drive retailers to accept Bitcoin is having all their customers say, ‘That’s how we want to pay.’”

Companies that accept Bitcoin include Whole Foods, Subway and Expedia, but most businesses have not expanded beyond the dollar.

Transferring one’s assets to Bitcoin is also time-consuming, as Macheel cites as another reason why the digital cash has not taken off. Users must download a Bitcoin wallet, connect their bank account and wait five to seven business days for the funds to transfer.

If cryptocurrency became mainstream, the global effects would be massive, according to Macheel.

“It would put people’s finances back in their own control rather than in the hands of banks and government,” Macheel said. “When you look at Venezuela and the volatility of their currency that’s stuck in the hands of the government, everyday people have no control over their money. They could use something like Bitcoin.”

Macheel says the movement to democratize financial services and make investing available to everyone is a huge step forward, but she does not know what the future will hold for cryptocurrency.

“It’s still really early, and a lot of people are saying that we’re not going to see any impact for a long time,” Macheel said. “I certainly remember in 2013 when nobody knew about cryptocurrency. So I think there’s a little impact today.”

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