For years, crypto looked like the kind of fad that would pass quickly, like hoverboards or Google Glass. But it has proved remarkably resilient, and now a quarter of American adults own some form of cryptocurrency. Investors are pouring billions into new start-ups that promise to use blockchain technology for everything from storing medical records to tracking streaming music rights. And engineers and programmers are bolting from cushy Silicon Valley jobs to work on crypto projects.
The technology behind these new apps and coins is called a blockchain, which is basically just a fancy spreadsheet with some extra features. The difference is that it’s maintained by a network of computers around the world, each running complicated software that agrees on what’s in the database and then adds and confirms new entries. That makes the system extremely secure, since nobody can take it down or change its contents, and anyone who wants to attack it would have to hack into many computers at once.
Proponents of crypto say this makes it a powerful tool for recording information and value in a way that’s both secure and accessible to everyone. The system is also faster and more cost-effective than traditional record-keeping systems, and it can be used to verify identity and make payments. And it’s open source, which means developers can build on it and extend its capabilities without permission from a central authority.
But critics of crypto say it’s a bubble that’s driven by speculation, not an underlying technology that will have real-world applications. They point to the enormous price swings that have characterized Bitcoin’s rise and fall, as well as to reports of fraud and money-laundering. They also argue that cryptocurrencies aren’t really worth anything, and that buying them is just like buying Apple stock—you’re betting on the popularity of an idea rather than an actual product.
Some of that criticism is legitimate. The crypto world is deeply divided between right-wing Bitcoin maximalists who believe the currency will liberate them from government tyranny; left-wing Ethereum fans who want to overthrow big banks; and speculators with no ideological attachments who just want to make quick money. These communities fight with one another constantly and have wildly different ideas about what crypto should be.
It’s also true that the blockchains that underpin cryptocurrencies use huge amounts of energy, mostly because of the computer software they run. This can consume as much as Thailand’s entire annual electricity consumption, according to Digiconomist, a website that tracks crypto energy usage. Critics also worry that if cryptos become mainstream, they’ll lead to an energy crisis as they replace cash, A.T.M.s that sit idle most of the day, and other power-hungry parts of our existing financial system. But those concerns are likely overblown. It’s worth remembering that our current financial system also uses a lot of energy, between the millions of bank branches and A.T.M.s and the mining of gold, oil and other natural resources.