Cryptocurrencies are taking off! Values for many cryptocurrencies have skyrocketed this year. You will be hearing about them more and more so you had might as well begin understanding them now.
Disclaimer: I own some Ethereum and Ripple cryptocurrencies.
Before I begin diving into this subject, let me give a very brief overview of cryptocurrencies. I know not everyone follows business or finance news like I do, and cryptocurrencies and blockchain technology are not yet terms familiar to the masses. A brief overview might help put the potential prepper aspects of them into context. That said, keep in mind that I am still learning about cryptocurrencies and blockchain technology myself and am by no means an expert by any stretch of the imagination. That said…
You’ve heard of Bitcoin, right? It’s the original cryptocurrency. Bitcoin is not a traditional, physical coin that you can hold in your hand. At its most basic definition it’s a digital, encrypted currency, hence “cryptocurrency.” It’s a medium of exchange, much like a dollar, only it uses decentralized control. It’s really just entries in a database that people can’t change without fulfilling specific conditions. Wait – what?
Think of the traditional methods of sending and receiving money that are not hand-to-hand transfers of physical money. These monies go from your bank to the vendor if it’s your debit card. For credit cards, Visa, Mastercard, etc. give the money to the merchant on your behalf as a loan. So let’s say you swipe your Visa card at the coffee shop. The coffee shop then gets the money from Visa. The transaction is then recorded by both Visa and the merchant – no one else.
Cryptocurrencies function in an entirely different way. They exist outside banking and government institutions. They are decentralized. They operate on a peer-to-peer network. There is no single server or central authority regulating it. So taking our example, let’s say you are able to pay the coffee shop with a cryptocurrency. The transaction is handled by sending the digital currency from your “wallet” address to the coffee shop’s wallet address. This is direct. This is peer-to-peer. Who is recording it? Computers are. In fact, a whole host of computers are recording it. This is what they are doing when they say they are “mining” coins. (Briefly: “mining” is helping record transactions with a computer and being rewarded for that “work” with the cryptocurrency being exchanged.) So that transaction for coffee gets “confirmed” by a variety of computers doing the mining. This is recorded on a public ledger, meaning it’s set in stone and can’t be changed. (Aside: it’s not “public” in the sense that your name is listed anywhere. It’s all code.) That “public ledger” process is the guts of blockchain technology.
So what’s the fuss about? While there are few coffee shops taking Bitcoins (right now), the fuss is about the absolutely gigantic potential this style of currency offers. Three things:
- It’s much harder to hack into these accounts. In the traditional model, a hacker only needs to access your bank account or your Visa account to move money. Under the cryptocurrency model, the hacker needs to hack the majority of computers doing the mining—as they all need to “confirm” the purchase. This is significantly harder to do.
- How long does it take to send money from the United States to India using Western Union or a bank? Too long. How long does it take with cryptocurrencies? In many cases—seconds.
- How much does Western Union charge to send money? Too much! How much does Visa charge a vendor for the privilege of accepting Visa? 3.5%? 4%? This is why you’ll see coffee shops often posting signs of a minimum purchase of X dollars to use a credit card. The sale has to be worth the sum they have to pay Visa for the transaction. How much does it cost to send money with cryptocurrencies? In most cases, pennies.
Another point worth mentioning is that cryptocurrencies have a finite number of “coins.” Compare that to governments that print money at whim. The total amount of Bitcoin is limited. It’s set into the code of the currency and cannot be altered. This “outside of government” attribute to Bitcoin, and similar alternative coins (altcoins), is how Bitcoin first came of interest to Libertarian-leaning people. The money is limited, outside of government, outside of government influence, and are (largely) private and anonymous. Some people and the numbers are growing by the day, say cryptocurrencies are the money of the future. Blockchain technology and the smart contracts functioning on it have the potential to change the way we do things in a way not seen since the internet.
So! How in the world does this pertain to preppers?
With a little creative thinking, one can see how cryptocurrencies could appeal to the prepper crowd. On the other hand, there are reasons to see why it wouldn’t. Let’s explore the pros and cons—from a prepper’s perspective.
Pros of Crypto
Anti-government. Preppers are traditionally seen as individualistic and anti-government. Cryptocurrencies by their very nature should appeal to preppers for this very reason.
Secure money in times of distress. If the U.S. government suddenly experienced mass disruption to its socio-economic status, cryptocurrencies could flourish. While the ground is still new, one only needs to look to the current situation in Venezuela. People have turned to cryptocurrencies as their country falls apart as a way to make and keep the money. Read this article from CNBC on how thousands of Venezuelans have turned to secretly mining digital currency for economic survival in the face of jail time.
Like gold. Many people see Bitcoin as digital gold. It represents a store of value. While it’s still too early to see how cryptocurrencies will play out, this is certainly the case for some. Read this article from The Street on how Bitcoin is exhibiting gold-like properties. The limited number of Bitcoins is part the reason many people like Bitcoin. Those that believe the dollar should return to the gold standard should like cryptocurrencies. There is a set amount and there can’t be anymore.
Cons of Crypto
You can’t hold it. This seems like a fairly obvious concern for preppers. If the grid goes down – how do you get access to your cryptocurrencies? Gold and silver don’t care about electricity or the internet. If you buy a stack of silver and an EMP hits – you still have a stack of silver. Preppers prep in part because they are unsure about our collective dependence on fragile infrastructure. Buying and keeping cryptocurrencies just add another layer of dependency.
Honestly, this is the only con I can think of, and I question how much of a con it is. To me, economic collapse, pandemics, natural disasters, things of that nature are FAR more likely to occur than an EMP hitting and smashing the grid. And even if that DID happen, getting the internet back up and running would be a top priority for governments. After all, the internet was designed as a security measure IN CASE OF nuclear war.
The world of cryptocurrencies is still in its infancy, but once you understand the technology and its potential, it’s obvious that cryptocurrencies and blockchain technology are going nowhere. There will be winners and losers along the way, but they are here to stay, AND they will become used far more widely than they are today. In the end, diversity reigns supreme. Would it make sense to have gold/silver and cryptocurrencies like Bitcoin? I think so.