When I was growing up, a popular series of comics ended up in a groundbreaking horror show called Tales From The Crypt that had a complicated rights structure that has, mercifully, prevented it so far from being rebooted. The show ended up launching quite a few careers and showing off some daring and innovative techniques in film editing. When we think of crypts, the initial assumption is to think of something like this, a dark place full of dead people and dastardly deeds. Although from time to time I muse on the subject of death, though, today I would like to talk about something else that is slightly related to this initial feeling, and that is crypto-currencies. In my previous discussions on areas of particularly cryptic importance , the focus of the writers of the books I reviewed looked at odd and weird things that may or, more likely, may not exist. When it comes to crypto-currencies, though, they most certainly exist but in a very odd and suitably cryptic sort of way.
My own personal familiarity with crypto-currencies is slight, but from time to time they have intruded on my world. At some of the local grocery stores I have shopped at, for example, there have been bit-coin machines where people can purchase such currency if they wish. A few friends of mine are enthusiastic about it and believe in its potential, although I have not heard their thoughts on the drama that has led to a falling about between two camps of the initial bit-coin that led to a split into two rival crypto-currencies. From time to time, as was the case yesterday, I receive advertisements for investment services involving crypto-currencies, which leads me to be concerned that my own web-browsing activities has led some algorithm to assume I am an easy mark for such appeals. That is to say, cryto-currencies are not a big part of my own personal world, but they are a big enough part for me to notice them and something that is noticed will eventually reach the level where I feel compelled to write about them.
Not being someone who is particularly knowledgeable about crypto-currencies, then, but someone who is at least mildly curious about them and their appeal, I consider this post to be one where I ask a lot of questions in the hope that those who are more knowledgeable may respond with at least some sort of answer to my own questions about why they are a part of our contemporary financial world. Ordinary currencies, which I am more familiar with, exist based on the full faith and credit of some sort of national banking system. Some currencies are tied to the dollar, while others are supranational currencies like the Euro, but most are national currencies which rise and fall based on floating exchange rates. A few people I have known have even been involved in the business of profiting off of foreign exchange and the occasional inefficiencies that allow profit in trading currencies in a particular way at a particular time. In our existing world currencies are a proxy for some sort of economy, and looking at the the way that currencies act in a market is a good way of knowing how the nation that currency represents is doing. Poor economies, like Thailand and Ghana, have noticeable inflation that regularly erodes the purchasing power of those currencies. Particularly poor economies like Zimbabwe or Weimar-era Germany, have hyperinflation that destroys the confidence of people in the political systems of those countries.
So what does a crypto-currency represent? There is no nation, at least to my knowledge, that is represented by such a currency, although the various crypto-currencies I am familiar with have some sort of support from certain wealthy individuals. In whom is our faith to be in terms of using these currencies? There is some kind of market that these currencies are involved in and certain financial products that involve them, but how are they regulated? What sort of global economic order do these currencies participate in? How can the people and institutions that back these currencies be trusted? Surely, I can’t be the only person asking this sort of question. Right now there appears to be a highly speculative market full of volatility, and the fact that many tech companies are seeing these digital currencies as a way of finding venture capital suggests that this is another area ripe for boom and bust cycles. The threat of regulation may make these currencies less appealing as a hedge against confiscation, which is the fear of many people given the low trust of governments around the world.
What, then, are some ways that crypto-currencies represent some of the more dominant trends of our life and times? For one, they are based fundamentally on mistrust of existing economics with heavy regulations and the threat of confiscation by increasingly debt-ridden governments, but they are themselves untrustworthy to many because of a lack of transparency. As somewhat exotic financial products, they contain the threat that previously exotic financial products have had over the past few decades, in being appealing because of bandwagoning and the lure of the new and unfamiliar, so that they are talked up far beyond the niche where they truly belong. Although for now they remain somewhat small in the larger scheme of financial products, at some point digital currencies may be a weapon of financial mass destruction in the hands of unscrupulous and fraudulent people. Without trust no financial system can endure, not even in the virtual world. As always, the question remains as to how we build trust in such a world as the one in which we live.
 See, for example: