Why Cryptocurrency Should Be Normalized Instead of Criticized

Table of Contents

• Introduction
• Common Criticisms of Cryptocurrency Face Valid Counterarguments
  • Volatility and Risk
  • Association with Illegal Activity
  • Cryptocurrency is Not "Real" Money
• Cryptocurrency Offers Significant Advantages Over Traditional Finance
  • 24/7 Trading and Rapid Transactions
  • Lower Fees
  • Empowers Underserved Populations
  • Decentralization Avoids Single Points of Failure
  • Programmability Enables Innovation
  • Transparency of Distributed Ledger
• Growth Metrics Show Increasing Adoption and Interest
• Normalizing Cryptocurrency Will Allow Further Improvements
  • Provides Funding for Startups
  • Attracts Talent
  • Encourages Competition
  • Enhances Network Effects
  • Promotes Financial Inclusion
• Conclusion

Introduction

Cryptocurrency, powered by blockchain technology, has grown rapidly since Bitcoin launched over a decade ago. The total market capitalization of cryptocurrencies rose from under $10 billion in 2016 to over $1 trillion in 2021. However, it still receives criticism and skepticism from mainstream finance and economic institutions. Cryptocurrency is seen as risky, volatile, used for illegal activities, and not "real" money.

Despite these criticisms, cryptocurrency has significant advantages over traditional finance and increasingly strong growth metrics that show adoption is rising. Normalizing cryptocurrency will allow further technological and economic improvements to occur.

Cryptocurrency should become an accepted, standard part of economic systems rather than face skepticism and disapproval from status quo institutions.

Common Criticisms of Cryptocurrency Face Valid Counterarguments

Some of the main criticisms levied against cryptocurrency include:

Volatility and Risk

It's true that cryptocurrency tends to be volatile compared to assets like stocks or government-issued currencies. In 2021 alone, Bitcoin's price fluctuated from under $30,000 to over $65,000 per coin. Such swings can make it risky to invest significant portions of one's portfolio into crypto.

However, volatility should be expected for any new, transformative technology in its early stages with a small market size relative to its growth potential. The growth of cryptocurrency also allows opportunities for major gains not seen in mature assets. Investors can also mitigate risk through portfolio diversification. Over time, analysts expect cryptocurrency volatility to stabilize as adoption increases.

Association with Illegal Activity

Some critics argue cryptocurrency's anonymity enables it to be used for illegal transactions, terror financing, and money laundering. Most famously, Bitcoin gained early notoriety for its role in transactions for drugs and other illicit activity on dark web sites like Silk Road. However, such uses accounted for less than 1% of all Bitcoin activity at the peak of the dark web.

In fact, most cryptocurrency today is not fully anonymous at all. Leading blockchain analytics firms like Chainalysis are able track the movement of funds and determine users' real-world identities. As most crypto requires buy-in from traditional finance like banks, which implement anti-money laundering checks like Know Your Customer (KYC), linking identity to on-chain activity has become even easier. Far from facilitating more illegal activity, cryptocurrency enables unprecedented transparency, traceability of funds, and patterns to analyze for financial crimes.

Cryptocurrency is Not "Real" Money

Perhaps the most fundamental criticism of cryptocurrency is that it is not backed by any government, central bank, or traditional financial institution. Unlike government-issued currency, no central party underwrites its value. It operates entirely through decentralized, peer-to-peer exchange enabled by blockchain. For some, this means cryptocurrency lacks inherent value and its price is based purely on speculation.

However, a currency does not need government backing to hold value or serve the traditional functions of money. Cryptocurrencies' market capitalizations today put them on par with major companies and even small nations' money supplies: as of early 2023, Bitcoin's total value exceeds $300 billion while Ethereum approaches $200 billion. People are clearly willing to exchange services, goods, and other currencies for these blockchain-based assets. Leading payments platforms like PayPal are incorporating crypto capabilities due to demand from users who consider it valuable. Through decentralized consensus, cryptocurrency facilitates transactions and value storage just like traditional systems.

Cryptocurrency Offers Significant Advantages Over Traditional Finance

Beyond countering common criticisms, cryptocurrency and blockchain technology provide profound innovations over current financial systems:

24/7 Trading and Rapid Transactions

Unlike banks and stock exchanges with limited operating hours, cryptocurrency runs 24/7 on global open-source networks. Users can conduct transactions or trading worldwide without time restrictions. Settlement of transfers happens rapidly, removing delays of traditional clearing processes. For example, Bitcoin network confirmations take just 10 minutes on average versus days for cross-border bank wires.

Traditional Wire Transfer	Bitcoin Transaction
Limited operating hours	24/7 availability
Multi-day clearing	~10 minute confirmations

Table comparing bank wire transfers to Bitcoin transactions

Lower Fees

Without centralized intermediaries, overhead costs of transactions submitted to blockchain networks are minimal. Average Bitcoin fees are under $2 per transfer. Banks, however, charge average wire fees of $15 domestic and $40 for international. Cross-border remittances facilitated by traditional financial institutions extract fees up to 10% of transfer amounts. On open payment networks, users get faster settlement for fractions of the typical costs.

Empowers Underserved Populations

Approximately 1.7 billion adults globally lack access to banking infrastruture according to the World Bank. However, broader access to internet and mobile phones has surpassed financial inclusion. Cryptocurrency leverages these technologies to offer accessible financial services to unbanked and underserved groups. Through connectivity alone, any users worldwide can store and transfer funds. Apps simplify wallet creation and transaction processes without exclusionary requirements some banks impose. As use expands in emerging markets, cryptocurrency makes financial access more equitable worldwide.

Decentralization Avoids Single Points of Failure

Centralized infrastructure contains vulnerabilities at concentrated hubs of control. Outages at a single institution may prevent users from accessing accounts or making transactions. In 2019 Visa's payment network crashed leaving millions struggling to pay.

Cryptocurrency communities rely only on distributed, peer-to-peer systems with no single authority. If a group of Bitcoin miners went offline, others worldwide would continue running the code and processing transactions without interruption. This avoids downtime risks inherent to centralized networks. No centralized attack or failure can take down systems decentralized across countless independent nodes.

Programmability Enables Innovation

Unlike previous payment rails controlled exclusively by large entities, cryptocurrency and blockchain allow permissionless innovation. Developers can create secondary layer solutions like stablecoins, decentralized finance apps, tokenization protocols, decentralized autonomous organizations, and blockchain-based business models we have yet to envision. Open-source infrastructure facilitates experimentation and new offerings. As use cases expand, so does normalized adoption through direct encounter with benefits.

Transparency of Distributed Ledger

Each currency's protocols mandates transactions occur in open, distributed ledgers showing encrypted user data. However no single entity can unilaterally modify records. This creates transparency and trust not seen in closed databases of traditional finance where invisible changes can occur. All parties in a blockchain system can audit flows and existing supply levels while still maintaining security through encryption. This radical accountability defends against risks like fraud, fabrication, abuse, and data inaccuracy pervasive in legacy infrastructure.

Growth Metrics Show Increasing Adoption and Interest

Beyond technical advantages over existing financial infrastructure, cryptocurrency has strong and strengthening growth indicators:

• The total cryptocurrency market cap has grown over 600% from 2020 through early 2023, indicating rapidly increasing overall investment.
• Registered cryptocurrency wallet addresses have increased from ~40 million to over 80 million since 2020, showing more users actively holding crypto assets.
• Major companies like Microsoft, AT&T, and Home Depot now accept some cryptocurrencies directly as payment. This demonstrates increasing recognition of cryptocurrency's value proposition.
• 74 of the top 100 banks have invested in blockchain and cryptocurrency projets according to a 2022 Crypto Banking Report. Growing Wall Street interest signals a shift in institutional narratives.
• Government regulatory clarity has significantly increased. SEC chair Gary Gensler has called on Congress to implement more oversight due to crypto's accelerated adoption. Legislators recognize these assets play an expanding economic role warranting dedicated policy.

This data makes clear that cryptocurrency is seeing surging utility and economic value with no signs of slowing down. What fringe developers and cypherpunks pioneered has become a globally substantial innovation. The numbers suggest acceptance and normalization must and will only continue in coming years.

Normalizing Cryptocurrency Will Allow Further Improvements

Instead of criticizing cryptocurrency, embracing its normalization in economic systems will fuel beneficial technological and financial transformations:

Provides Funding for Startups

Early cryptocurrency adopters benefitted financially from the immense rise in valuation. Newfound crypto wealth has provided funding for additional blockchain entrepreneurs to build on this technology. Continued crypto appreciation at current growth rates may enable future rounds of technological funding and innovation, provided normalization continues apace.

Attracts Talent

The soaring opportunity in cryptocurrency and blockchain has attracted experienced technical and financial talent from top Silicon Valley tech firms and Wall Street institutions. For example, Brian Armstrong, CEO of one of the world's largest crypto exchanges Coinbase, was a former software engineer at Airbnb during its early high-growth period. This shows how crypto is drawing some most qualified engineers and builders away from established firms. Crypto enables new career pathways in an evolving landscape. Normalize valuations could enable blockchain projects to incentivize talent at levels rivaling Big Tech compensation.

Encourages Competition

Expanding blockchain implementation exposes vulnerabilities and inefficiencies of legacy systems by demonstrating potential improvements. Seamless globalized commerce, automated contracts, transparent ledgers and lower fees empower users over established financial gatekeepers. Competitive pressure may prompt traditional institutions to upgrade their own technology infrastructure for better user experiences and lower operational costs. The more normalized crypto becomes, the more it can force positive changes among ossified intermediaries.

Enhances Network Effects

For all its radical design, crypto still faces some major hurdles hampering more ubiquitous daily usage as currency. Volatility must settle, transaction speeds increase, scalability improves, and user interfaces simplify before most citizens will convert all holdings to blockchain-based assets. However, increased adoption thanks to normalization and better regulatory clarity can provide stability while intensifying beneficial network effects. Given cryptocurrency's premise on peer-to-peer decentralized exchange of value, the more people involved, the stronger and more useful it becomes for each participant.

Promotes Financial Inclusion

While expanding access for the underbanked as covered earlier, normalized cryptocurrency could prompt reform among banks and governing institutions to serve vulnerable groups. Implementation at scale in emerging markets may demonstrate efficiencies over current remittance channels or payment solutions. Incumbents may expand access to compete with crypto's financial inclusion advantages. Furthermore, the decentralized model inherent to cryptocurrency could protect users in politically unstable regions where government funds can freeze during times of turmoil while peer-to-peer exchange facilitates commerce. Over 2 billion citizens live under authoritarian regimes or destabilized states so for them crypto provides liberty over financial mobility.

Conclusion

Despite facing ongoing criticism, cryptocurrency and its underlying blockchain technology have the potential to profoundly upgrade financial and even social systems worldwide. Growth metrics already indicate a steady march toward mainstream normalization and stability as adoption accelerates in recent years. Entrenched institutions and status quo authorities may resist decentralizing innovations that distribute power, but global citizens increasingly embrace the vast improvements crypto enables. By further normalizing cryptocurrency, society can unlock the next generation of financial and technological transformation that uplifts freedom and prosperity for billions who have lacked it.