In 2021, the cryptocurrency industry grew by orders of magnitude, reaching a whopping $2.0 trillion in value, as it drew the attention of Wall Street’s biggest names. As Coinbase prepares to go public in New York on Wednesday, AFP looks at a sector that was created from the ground up just 12 years ago. One or more anonymous individuals, using the alias Satoshi Nakamoto, released the founding white paper of bitcoin on October 31, 2008, in the aftermath of the financial crisis. The aim was to develop a payment system whose protection would be supervised by software rather than a central bank or financial institutions, and whose rules would be nearly impossible to change.
Although anyone can “mine” for new bitcoins, doing so necessitates the use of massive data centres, which has led to sites like Coinbase offering cryptocurrency trading. Certain digital currencies can be transacted through banks and payment services like Paypal. Since the first block of 50 in early 2009, almost 18.7 million bitcoins have been produced. Nakamoto has set a cap of 21 million bitcoins. Despite its uncertainty and drawbacks as a payment method, bitcoin is being viewed as a store of value that might be one day equal, if not exceed, gold as a haven investment in the face of high inflation.
In Nigeria, where the naira has lost half of its value against the dollar in recent years, a third of the population is said to have used cryptocurrencies. Since crashing in 2018, bitcoin’s value has since recovered and has broken records, rising from about $12,000 in October 2020 to over $62,000 today. In light of this, central banks and market regulators have issued warnings about the effect of market volatility, especially on small investors who may face significant losses. However, it is clear that bitcoin has benefited some individuals and businesses significantly, and major central banks are developing their own digital-currency ventures.
Tesla, the electric car company, has made a $1.5 billion investment in bitcoin and started accepting it as payment in March. Elon Musk, the multibillionaire CEO of Tesla, has evangelised for cryptocurrencies on social media, which has boosted the demand and prices. Many cryptocurrencies are attempting to compete with, or supplement, bitcoin. The second most valuable cryptocurrency is ethereum, which recently surpassed $2,000 for the first time. According to specialist website Coinmarketcap, which lists over 9,000 different cryptocurrencies, the cryptocurrency market is worth more than $2.0 trillion in total. Some bitcoins are referred to as “stablecoins” because their value is linked to a conventional asset like the dollar, allowing them to escape the instability seen in cryptocurrencies. Meanwhile, with bitcoin and other cryptocurrencies being created by solving puzzles with powerful computers that consume massive amounts of electricity, environmental concerns have grown.
