Once dismissed as fringe interest of tech evangelists, cryptocurrencies like bitcoin have rocketed to mainstream popularity and trillion dollar valuations. In just a decade, they’ve grown from digital novelties to global powerhouses with vast influence over financial markets and the world economy. To many, they represent a democratizing force wresting control of money creation from central banks and Wall Street. But critics say that cryptocurrencies empower criminals and terrorist organizations, are vulnerable to extreme market volatility, and fuel inequality by offering speculators unregulated investments.
Cryptocurrencies are digital tokens designed to allow peer-to-peer transactions without requiring a trusted third party such as a bank. They are typically stored in digital wallets, which are encrypted to protect against hackers. The value of cryptocurrencies fluctuates wildly, and as of 2023 only a small fraction of users actually use them to make purchases. Cryptocurrencies are popular among investors, who see them as a way to make money by betting that the prices will rise.
But cryptocurrencies’ growth has also spawned illicit activities, including ransomware attacks and transactions used to finance terrorist activity, drug cartels, and money laundering. Authorities are working to crack down on those activities, and some cryptocurrencies have lost a portion of their value after being devalued by soaring volatility. Mining the cryptos requires enormous amounts of energy, and concerns about its contribution to climate change have led some to switch from a proof of work model that rewards miners for securing the blockchain with computing power to one based on staking.