"Cryptocurrency Mining, Bitcoin mining stock photo" by Crypto360 is licensed under CC BY 2.0
Bitcoin, Etherium, Cardano, and hundreds of others are known as cryptocurrency, and can be bought and sold on various exchanges, like Binance and Bitbuy. You can also invest in crypto by buying various trusts and ETFs in the stock market. As of the time of writing, Bitcoin (BTC) has a market cap of $850 billion CDN, and Etherium (ETH) $340 billion. The crypto markets are very volatile, and are open 24x7. Investing in crypto is risky. Be prepared for a wild ride, and potential large losses.
So what, exactly, is cryptocurrency, and what is it not? We were told that cryptocurrency allows commerce between individuals without a central authority, like a bank. We were told that Bitcoin (BTC) was beyond the reach of governments. We were told that commerce using it was not traceable. These were all untruths. First, crypto is not encrypted, as the name suggests. Transactions are recorded using clear text and the information is publicly available. Second, the parties to a transaction are not anonymous. Although difficult, transactions can be traced back to individuals. Thirdly, Bitcoin is not beyond the reach of governments. Recently, the FBI was able to retrieve most of the ransom payments in Bitcoin (BTC) demanded by a group of hackers who had compromised the Colonial Pipeline. Fourthly, we were told that no single individual can control the network, yet those with more money can purchase more computing power to process Bitcoin (BTC) transactions. So money rules. After it became apparent that Bitcoin (BTC) was not very useful for transactions, we were then told it was "digital gold" and Ethereum was the platform for Distributed Finance (DeFi). Digital gold? Really? If I buy gold, I get some metal. If I buy Bitcoin (BTC), I get a file on a computer somewhere which has exactly no value, except what investors attribute to it.
How does cryptocurrency work? In the case of Bitcoin (BTC), "miners" employ large scale computer systems to build the shared, public central ledger, made up of blocks of transactions. This is called Proof of Work. Miners compete to build the next block, using computing power to solve difficult mathematical problems. Whoever solves the problem first gets a reward. And because the process involves huge amounts of computer power, criminals would have to employ larger computer systems than the valid miners, and stand to lose all their investment if caught. This pretty much guarantees that criminals will not be successful in subverting the system, but the downside is it requires massive and exponentially increasing amounts of power. In a world increasingly concerned about climate change and the burning of fossil fuels, this is a major negative.
So the crypto world came up with Proof of Stake. In Proof of Stake, those who own the most crypto act as "nodes" to validate transactions and build the shared ledger. Ethereum currently uses Proof of Work, but will be soon upgrading to Proof of Stake. Proof of Stake uses much less power than Proof of Work, but the control of the network then falls into the hands of the node validators. Again, money rules here: the more Ethereum I can buy, the more influence I have. Cardano, on the other hand, is already using Proof of Stake but does not share the same popularity as Ethereum, at least at present.
This year of 2021, in particular, is proving to be a tough year for crypto. Dr. Craig Wright, the Australian Computer Scientist and entrepreneur, claims to be Satoshi Nakamoto, the inventor of Bitcoin. He is suing crypto exchanges who he feels have violated his copyright. He does not want Bitcoin (BTC) and Bitcoin Cash (BCH) to use the Bitcoin name, and the transaction ledger they have, according to Wright, is owned by him and cannot be used without his permission. Dr. Wright has his own crypto, called Bitcoin SV, for Bitcoin Satoshi Vision. BSV is much more efficient than Bitcoin (BTC) per transaction. It is also more stable: the BSV protocol is fixed, and so users can depend on it not changing as they invest in the ecosystem: finance loves stability and predictability. However, it still uses Proof of Work and so has the problem of excessive energy use.
Governments are also taking a close look at crypto this year. They want the exchanges to be regulated, and they want to collect tax owed. Exchanges that don't comply will be shut down and will face legal consequences. China and India are cracking down hard on crypto exchanges, and other governments are taking a close look. This all bodes badly for the crypto markets in the short term, but in the end, a regulated crypto market is better for investors. Also, several exchanges have been hacked, and customers have lost a lot of money. There is no recourse if your exchange gets hacked and goes out of business, beyond expensive and lengthy lawsuits.
Some Christians think technology in general, and crypto in particular, is a fulfillment of prophecy. In Revelation 13:16-17 we read that a "beast" (political power) will cause all people to be given a mark on their forehead or hand, and they cannot buy or sell without this mark. Some Christians think this is a reference to an embedded chip, or some other technology, allowing governments to control your personal finances. But the reference is to a slave, who in first century Rome, was branded by their master. This prophecy is referring to those who slavishly support the political powers that be, by supporting its wars for example, and so make themselves an enemy of Christ. It almost certainly does not refer to an embedded chip or to crypto. The very next chapter speaks of those who belong to the Lamb, Jesus Christ, as having his name and the name of his father written on their foreheads. The first is a willing slave to the political powers, the second a willing slave of Jesus Christ.
So where does that leave us? Should Christians invest in crypto? I am not a licensed financial adviser, so take this with a grain of salt and do your own research. Don't invest more than you are prepared to lose. There will be a major shakeup in the crypto markets this year as governments begin regulating them. Personally, I stay away from Bitcoin (BTC) and Bitcoin Cash (BHC) until the lawsuits launched by Dr. Wright work their way through the courts. I look at crypto that uses Proof of Stake, or some other energy efficient method. The cries from the climate activists will only get louder, and rightly so: the world is heading towards irreversible damage to the climate because of excessive fossil fuel use. Cryptocurrency is likely here to stay--even central banks are making plans to create their own--but it has a very rough period ahead, so proceed cautiously.