Despite all the enthusiasm surrounding crypto; there are concerns that they pose more problems than solutions. The problems with cryptocurrency are not unique; they are inherently problems with society at large. These problems only seem to become bigger with crypto, perhaps proving crypto’s relevance, and the potential it has.
Crypto has only brought to the fore everything that bad about the world of finance; it is like an open market- drawing in the good, the bad, and the ugly.
Crypto’s problems are many, diverse, and serious. Since they are also society’s problems it seems that fixing them will require fixing society first.
Problems With Cryptocurrency (Top 6 Problems)
Validation By Association
It is not clear who started this, or why it came to become so visible in the world of cryptocurrency. However, whenever a new cryptocurrency project is announced, people immediately start to look for names like Stanford, Harvard, MIT. They immediately start to look for proof that the brains behind the project have worked at previous projects like Ethereum, Bitcoin Cash, and Cardano.
But Validation by Association has been proven to be faulty; the number of failed projects shows that it does not work. It is strange that crypto should turn to traditional (educational) institutions, which are an extension of the old world order which it has come to disrupt.
Satoshi Nakamoto, the founder of bitcoin does not owe his success, or the success of his brainchild to association with anything or anyone. A solid project should not need to be validated by association with anything else.
Furthermore, Validation by Association leads to the duplication of ideas as there are more “meme coins” than the world knows what to do with. That is another problem.
The proliferation of Meme Coins is another problem that cryptocurrency will need to deal with if it is going to succeed. Yes, crypto is a community, and that community will need to do something about this phenomenon that threatens to throw a spanner in the wheel of the whole movement.
Meme Coins, also called Shitcoins are crypto projects that have no value in themselves. In many cases they are just shameless copies, created to look like other previously successful crypto coins. The vast majority are pump and dump scams that are soon forgotten, but some of them do manage to catch some wind in their sails.
Wind or not, they take away credibility and market value from real crypto. When they crash and lose money for investors, they also give crypto a bad name. Maybe in a free world (and crypto is all about freedom) people should be allowed to lose money if they choose. But people are not really choosing. How can they choose when they don’t know what they are doing?
Inadequate information is perhaps the biggest trouble with crypto; most people don’t what it is and what it is not. Hence, it is very easy to fall for what it is not, thinking that one is investing in crypto. Crypto Ponzi Schemes have found it easy to thrive; people have lost billions of dollars to cleverly designed scams.
These scams often take advantage of the fact that people do not understand crypto. Fighting them through the police and FBI may continue to be grossly inadequate because crypto is designed to be anonymous; difficult to police.
The crypto community has to do more to educate people about what it is all about; tradable assets, decentralized, and risky. People need to be able to recognize frauds when they see them; it actually seems easy enough because they often promise “huge gains,” or “passive income,” or other things that make crypto look organized and certain. Perhaps it is not a lack of information; people are just too greedy.
Greed is a problem of people, and it seeps into crypto polluting it like industrial waste seeps into a well. Greed is everywhere; it is the reason why stock bubbles form all the time. However, greed has a particularly bad impact in crypto.
Greed makes crypto look bad because this is a whole new thing; yet to make a name for itself. Crypto is still being called a “bubble,” “a Ponzi scheme” and a “scam” in the media, and so when something bad happens it seems to lend credence to these claims.
Furthermore, crypto has a relatively thin market value, and so it is easy to pump even without any intention to do so.
Nevertheless, it seems that crypto makes it too easy to get rich; and when news of a person who has made a lot of money through crypto gets out, it easily causes a mad rush for the assets, in which people ignore all caution in the hope of hitting the jackpot. Many then fall into crypto scams or just invest at bad times.
Government Opposition is one thing that has worked against crypto, at least to a large extent. When governments label crypto as an evil championed by criminals, it tends to give a bad image to the thing. This makes crypto look dirty, and as a result, many potential investors have been dissuaded from investing.
Dissuasion is always done with the aid of state controlled media; whenever something positive happens in crypto the news gets ignored, but whenever something bad happens they shout it all over the media.
Those who have not been dissuaded by the bad news are often dissuaded by the financial structure which is controlled by the government. Unfriendly governments have shut out the financial system from crypto; meaning that people cannot directly fund their crypto wallets from their bank accounts.
This inhibits the flow of new money into crypto, and also stalls the widespread adoption of crypto into the world of commerce.
Lack Of Security
Lack of security remains a problem with crypto; people have woken up to find empty crypto wallets, with no hope of getting back what they have lost. Exchanges have not been left out of these heists; there have been cases of millions stolen from crypto depositories.
The biggest crypto heists include: The KuCoin crypto exchange ($285 million), The Wormhole heist ($334 million), Mt.Gox crypto ($480 million), and Coincheck ($496 million).
About $2 billion worth of crypto has been stolen so far, and even though it seems that the prevalence of crypto heists has reduced, there is no evidence that it is a thing of the past.
What Do These Problems Mean For Crypto?
Nothing. Regardless of any short term pump or dump which may occur, one thing seems clear, even to the most hostile of governments; crypto has come to stay.
Crypto has come to stay, despite the opposition from government, or the many scams that give it a bad name. Obviously, the bad name is not enough to derail the potential that it brings;
Low cost, high speed transactions
A deflationary asset; something to secure the future, and help escape poverty.
These are things that people all around the world yearn for, and when something solves a problem, it tends to be accepted.
- Is Cryptocurrency A Ponzi Scheme?
- How Is Bitcoin Not A Pyramid Scheme?
- Is The Stock Market A Pyramid Scheme?
The problems with cryptocurrency are not insurmountable; each problem already has people working on it to create a solution. Besides if the existing financial system did not have problems then there would be no need for the creation of crypto. The problems with the existing financial system have not rendered it obsolete; leading to the premise that problems do not kill an assets’ potential.