Wikipedia defines cryptocurrency as a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.
The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain that serves as a public financial transaction data base.
Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency. Since the release of bitcoin, over 4,000 imitators have been created.
We have previously discussed interest in cryptocurrencies and Facebook’s Libra, see blogs dated 16 Feb 2018 and 12 Jul 2019, in which we suggested that legal tender is what the government says it is, and governments don’t like competition. Consequently, cryptocurrencies face serious barriers.
We are now seeing some problems as Facebook attempts to establish its Libra “stablecoin” entry into the world of cryptocurrencies. Libra, initially announced with much fanfare and an impressive list of potential co-sponsors, is now seeing a departure of key partners become an exodus, which could affect Facebook’s planned 2020 launch. This is not surprising given that governments have stepped up their opposition.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA