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The uncertainties surrounding cryptocurrency

It has become a craze in recent years, yet, few understand the risks and opportunities that cryptocurrencies such as Bitcoin present. Here, John Mongelard provides a useful insight into cryptocurrency.

Crypto Have you been on the Dark Web? I haven’t. The security services track you if you do and so, to avoid losing my eligibility for double-O status, I have stayed off. But some of my non-secret-agent-eligible friends have and they tell me it’s like the Wild West. For example, there is an imitation eBay site – one where they use the same brand colours, so you know you can trust them. On it you can buy guns, drugs and many other unsavoury materials. To pay for said items, vendors insist on the use of cryptocurrencies.

The most famous example of a cryptocurrency is Bitcoin. It shot to fame and value, much like the price of tulips or South Sea shares, towards the end of 2017. But its dollar value is now at much lower levels. Most cryptocurrencies or cryptoassets use encryption and distributed ledgers, like blockchain. They use a combination of cryptography and a peer-to peer computer network (nodes). A copy of the whole ledger – an updated duplicate – is held on each computer. The technique therefore allows you to create a single version of the truth and/or a list of all of the transactions made. The technology is potentially very powerful but regulation does not traditionally have a strong track record for keeping pace with such innovations.