By Jonny Lupsha, Current Events Writer
Bitcoin, a currency with no national backing, soared past $50,000 last week. It was invented 12 years ago and is the leading cryptocurrency. Cryptocurrencies have changed the world in the digital age.
The digital currency Bitcoin rose to new heights last week, breaking $50,000 in value for the first time in its history. Invented in 2008, the cryptocurrency started as a pioneering form of e-money in use in 2009, backed by no government and no central bank. Owners simply buy and sell units—or portions of units—of Bitcoin in secure private transactions. Like a traded stock on Wall Street, its value rises and falls regularly, and sometimes drastically.
And Bitcoin isn’t alone. Several other cryptocurrencies have rocked the economic world, including Ethereum and Dogecoin. However, despite the amount of money investors have put into different forms of e-money, these digital currencies are seldom understood by the public.
In his video, “The Cryptocurrency Craze,” for The Great Courses, Dr. Connel Fullenkamp, Professor of the Practice in the Department of Economics at Duke University, explained how they work.
In Bit We Trust
If necessity is the mother of invention, Bitcoin is no exception. It was driven by a demand for extreme financial privacy and with politics in mind, even circumnavigating government regulation.
“Most of us take for granted the government’s role in the creation and regulation of money,” Dr. Fullenkamp said. “We might like the fact that the government stands behind the US dollar, but there’s always been a libertarian school of thought which argues that money should be privately provided and regulated instead.
“This debate has profoundly affected the history of the monetary system in the United States.”
Dr. Fullenkamp said that money must provide three basic services. First, it must maintain its value over time. Second, it has to be universally accepted as payment for goods and services. Third, money must function as a way to measure earnings, expenses, debts, and assets. While cryptocurrencies often maintain their value, the attraction to them is that their anonymity and privacy will generate the second and third basic services of money: More retailers will accept them as they grow and they will become more appealing as expense measurements.
Putting the “Crypto” in “Cryptocurrency”
“A truly anonymous currency must come with some way of tracking ownership and making transfers without a central institution to oversee those accounts and transactions, and the currency must find a way to maintain its value,” Dr. Fullenkamp said. “In 2008, a white paper released under the name of Satoshi Nakamoto described the system known as Bitcoin, followed by the supporting computer code….