Question

a. Explain your understanding on the cryptorcurrency and its development.

b. Do you think money should be traded as commodity? Why and why not?

c. Should the cryptocurrency be endorsed by the governments? Why and why not?

Answer 1

a. Cryptocurrency is essentially a virtual/digital asset which is used as a medium of exchange. It does not exist in a physical form like currency and is not issued by any central governing authority. The idea was first tested around in late 20th century and several forms were released such as ecash, bit gold, later on bitcoin in 2009, which is the most famous form of cryptocurrency.

b. Money should not be traded as a commodity because the value of money being held and hoarded unnecessarily increases, people use money as a commodity in foreign exchange due to the difference in values and it enhances the value of the money. And the negative aspects of these are that, money could be hoarded extensively if it is used as a commodity. People will hoard huge amounts of money as foreign exchange investors do if its value as a commodity increases drastically. Thus instead of using it as a medium of exchange, value of money will start to increase and demand for other commodities would start to reduce which will slowdown the industries.

c. Cryptocurrency should not be endorsed by the governments because it is not regulated by the central governing authority, only a few people own cyptocurrency, thus the size of the market is very small. Plus as it is privately developed the number of transactions and speed is not uniform. There are cybersecurity issues and price volatility as seen from the case of bitcoin which seriously dents whether it should be made public because it increases volatility.