Confused about cryptocurrency? Baffled by Bitcoin? Dumbfounded by Dogecoin? Join the crowd. Digital currency is an interesting, inventive and perplexing field.
As a currency, crypto is still in its infancy; the technology was only created in 2008 and began circulating in 2009. Awareness has grown about the uses and potential of cryptocurrency but, with that, concerns also have arisen about hacking, scams and a lack of protections for consumers. We explore some of the basics to keep readers up to speed.
Meaning and Uses
Cryptocurrency is digital or virtual currency that utilizes cryptographic techniques to allow for secure and decentralized transactions, giving people the ability to make financial transactions independent of banks, financial firms or a central government. Cryptocurrencies are supported by a technology known as blockchain, which maintains a transparent and immutable record of transactions.
Bitcoin emerged as the first digitally circulated currency about 16 years ago, and awareness has grown through the years.
“I do think more people know about it and are interacting with it,” says Andrew Morin, Ph.D., research assistant professor of cyber studies at the University of Tulsa.
In Oklahoma, for example, Gov. Kevin Stitt signed into law last year HB 3594, designed to safeguard digital asset usage in the state, such as prohibiting the state government from impeding on citizens’ ability to use crypto or digital assets to purchase goods or services, or imposing additional taxes on payments used with digital assets.
Choosing Cryptocurrency
Individuals interested in using the digital currency can buy it through avenues such as traditional investment platforms, cryptocurrency exchanges or mobile payment services. Some users see the currency as a way to invest or make a profit. Others like the ability to make quick payments or to avoid transaction fees that traditional banks may charge.
People can also use cryptocurrency to buy different products and services – such as on technology and e-commerce sites that accept Bitcoin as a payment method. Home Depot also accepts Bitcoin payments, and some car dealers and insurance companies accept cryptocurrency, as well.
Morin says that while cryptocurrency is innovative, there are some concerns with protections for users and the prevalence of scams and fraud.
“It exists in a regulatory vacuum,” he says. It’s a space that doesn’t offer as many protections for consumers and investors as traditional methods, such as those provided by the Electronic Fund Transfer Act, he mentions. The act protects consumers from unauthorized electronic fund transfers.
For example, if you need to dispute a purchase with your credit card, the credit card company has a process to help you get your money back. Cryptocurrencies typically do not come with such protections, often leaving people with no clear path to restitution.
“By and large, you’re gambling your money in a very consumer-unfriendly environment,” he says.
Another major concern is cryptocurrency fraud and scams, such as through fake websites, virtual Ponzi schemes or online dating scams where criminals try to persuade people they meet on dating apps or social media to invest or trade in virtual currencies.
Morin says that overall, he is “cautiously optimistic” about the future of cryptocurrency and does believe there are efforts to develop legitimate uses for the currency. But he also believes better protections, security, transparency and regulations will be needed to make it a safer space for consumers and investors.
