Blog article
See all stories »

What is the actual use of cryptocurrencies?

In the early years of their existence, the concept of cryptocurrencies seemed like nothing more than a joke or a financial scam to the majority of the people who heard of them. The moment you brought up the topic, you would either be considered a scammer or one who had been scammed and dismissed. We have come a long way since then. The world has learned of cryptocurrencies and most of us have come to regard it as an interesting financial asset that has been added to the very large pool of already existing financial assets. Some of us trust cryptocurrencies to be a reliable way of income and unit of exchange, while others see the technology behind cryptocurrencies as the source of the kind of breakthrough that would change the world. Something on par with the invention of the first lightbulb or even sliced bread (who could have ever thought?).

Despite this, one line of connection to the early days of Bitcoin and cryptocurrencies today remains the way it has, seemingly, always been. The use of cryptocurrencies has always been popular in the retail markets for things that are not necessarily legal, or all that savoury and this trend continues even today. But is that the only use of cryptocurrencies?

The things that are illegal

The concept of cryptocurrencies, in general, a specifically Bitcoin lends itself to criminal activity very easily. The fact that cryptocurrency transactions are impossible to track makes them the ideal candidate for online payments for things that should not be bought. They act like cash - they do not have a name attached to them like a card, and they get transferred directly between the two parties, with the middleman being the blockchain record that remains unalterable and usually untraceable. This means that the only way to make sure that someone has sent payment is to be tracking that person, and to make sure that someone has received payment is to be tracking their account. Otherwise, it is impossible to know who sent the money or who received it.

This means the blockchain has become widely known and even more widely known in the markets for things that are illegal. According to a study published to the Social Science Research Network in 2018, a significant amount of all Bitcoin transactions were dedicated to the black markets. Around 46% of all transactions were made by the owners of the coins in order to purchase goods and services off of the black markets available around the so-called “dark net”. The people were seeking to purchase illegal substances ranging from drugs to specific chemicals that cannot be legally purchased without a permit in their country. There were also those who purchased pornography, weapons and other goods and services that are not legally available. All in all, according to the report, around 76 billion US dollars worth of transactions were dedicated to such goods and services. This means that the black markets are being driven, in a major way, to the black markets through enabling e-commerce. This is not news to the majority of us who are aware of the existence of bitcoin, as there have been reports such as this for many years, but this report was published as recently as December 2018.

Beyond illegal activities, it seems that cryptocurrencies are also becoming more associated with things that are not necessarily savoury for certain individuals. Those who want to avoid being discovered to be spending a lot of time doing things like playing games in online casinos and watching pornographic videos online. According to Peter Tompson of Playamo Australia, this enables certain scammers to use the opportunity in order to rob these people of their money, deceiving them into depositing by pretending to be a Bitcoin gambling venue, and then running with the cash. It is not hard to see then why such a strong connection between the black market, illegal goods and services, scams, unsavoury activities and cryptocurrencies would create the image that cryptos have.

The things that are legal

Although all of that is not the only thing that Bitcoin can be used for, and these illegal activities should not be what is defining cryptocurrencies and their future. This beautiful technology also enables a large number of people around the world to work with and for better purposes around the world. Things such as investment, paying tuition, donating to charities and paying for simple goods and services are all part of the use of cryptocurrencies and account for more than 50% of all transactions of cryptocurrencies. There are many things that can be done with cryptos and that has been part of the crypto tradition for many years as well. After all, one of the very first transactions with Bitcoin was to purchase a pizza. The tradition of using crypto for everyday things has been around for longer than the other. It has been the reason for the creation of Bitcoin in the first place and this should never be forgotten.

 

10329

Comments: (4)

Melvin Haskins
Melvin Haskins - Haston International Limited - 02 August, 2019, 09:02Be the first to give this comment the thumbs up 0 likes

I am at a loss to understand why I would want to invest in a highly volatile currency to pay for simple services, such as tuition fees, shopping, buying a pizza, etc.

I perceive that the only value of crypto currencies outside of purchases on the dark web, or watching pornography, is to gamble on the rate of exchange, avoid paying tax, hide income or similar.

I have a regular bank account to pay for regular purchases and have no reason to hide these activities from anyone. Why do I need a crypto currency account?

A Finextra member
A Finextra member 05 August, 2019, 14:37Be the first to give this comment the thumbs up 0 likes

Dear Melvin, On January 8, 2020 the European Anti Money Laundry Directive no 8 goes live as legislation in the EU. Among other changes, crypto currency providers and wallet services all come under the AML/ATF regulation and need to provide full KYC on their users of crypto currencies.  The days of anonymous payments for criminal or shameful purchases is coming to an end in EU. The AMLD 8 also contains new restrictions on anonymous pre-paid cards.  Furthermore all payment accounts in the EU need to be accessible online by the law enforcement authorities so the entire EU needs to build a solution whereby police and tax office easily can check any payment account. 

Gerard Hergenroeder
Gerard Hergenroeder - Payments Shark - Millersvile 05 August, 2019, 14:44Be the first to give this comment the thumbs up 0 likes

Bitcoin is NOT a mass market currency. It has little or no value in the marketplace. Remember the tulip bubble!

Melvin Haskins
Melvin Haskins - Haston International Limited - 05 August, 2019, 16:56Be the first to give this comment the thumbs up 0 likes

The European Anti-money laudering directive is extremely unlikely to work on Bitcoin and other crypto currencies. Even if it does, it makes the use of crypto currency even less useful.