Cryptocurrency has taken the world by storm in recent years, and even more so in recent months following Dogecoin’s exponential growth in value.
According to coinmarketcap.com, in the last year, Dogecoin’s lowest point was just $0.002277, while it recently hit a high of $0.7376. 73 cents might not seem like much, but that is a 32,000 percent increase over its lowest point and a major return of investment for those who invested.
Now, Malcolm Wardlaw, a finance professor at the University of Georgia, is speaking out to clear up misconceptions about cryptocurrency, particularly concerning Bitcoin and Dogecoin.
According to Wardlaw, most cryptocurrencies focus on the idea of being a “shared ledger.”
“That ledger is not maintained by one person, or one company, or one entity, but rather is shared amongst a large group of computers,” Wardlaw said. “Then you need some sort of clever way of maintaining the integrity of the ledger so that the ledgers don’t get out of sync.”
On a basic level, those who came up with the idea of cryptocurrency also came up with the idea that the ledgers could be maintained through computers solving a set of computational problems.
Bitcoin, a type of cryptocurrency, incentivizes those who complete these computational problems to maintain the ledger by awarding them with a certain amount of Bitcoin. This process is referred to as “mining” in the cryptocurrency community.
So, is cryptocurrency worth investing in? Wardlaw said in his opinion, the answer is “no.”
“I got into it because it was neat, it was a very interesting technical solution to a problem,” Wardlaw said. “I just don’t know that it’s a solution to a problem that anyone really has.”
Wardlaw said while Bitcoin and Dogecoin currently have a perceived value, that could change at any moment due to their reliance on selling the currency from one person to another in a cyclical nature.
“You can say, ‘I’m playing the short game,’ or ‘I’m trend trading,’ but you have to really drill deep and ask yourself, ‘well, why does that work?” Wardlaw said. “You want to be careful with investment strategies that rely upon the next guy in the chain being a sucker.”
When it comes to local communities and economies, Wardlaw said his biggest concern relates to those who invest large sums of money into cryptocurrency.
“The biggest thing that I worry about … is when you get a gold rush, where people can throw their money at something that they don’t even remotely understand,” Wardlaw said. “I’m old enough to remember the .com bust, and a lot of people, they got really hurt by that thing.”
The other concern, at least when it comes to Bitcoin, is the environmental impact of “mining.”
“One of the things you may have heard is that the Bitcoin network consumes the power consumer by Denmark, and it’s probably more than that now, every day,” Wardlaw said.
Bitcoin miners typically use high-powered computers which consume large amounts of electricity during the mining process.
Tesla and SpaceX CEO Elon Musk recently decided to stop accepting Bitcoin as payment for Tesla vehicles due to this environmental impact.
While Bitcoin was intended to be a serious attempt at creating a cryptocurrency, Wardlaw said Dogecoin was intended to be a complete spoof on Bitcoin and not something to be taken seriously.
“It weirdly sort of took off, even though it was a joke,” Wardlaw said. “The guy who had made it really stopped doing any development work on it …. But then weirdly it started to increase in price, and he was like, ‘Guys, stop it.’”
