10 Common Crypto Skeptic Questions and How to Answer Them

Move over cypherpunks. The value of cryptocurrency is now top-of-mind for your parents.

When you (or your parents) start asking about the long-term value of cryptocurrency, you leave, not with answers or a feeling of security, but with insight into the fragility of existing systems.

‘Why does Bitcoin (BTC) have value?’ becomes ‘Why does the U.S. Dollar have value?’

‘What do blockchains do?’ becomes ‘What will happen to lawyers/realtors/credit card companies in 10 years?’

‘Isn’t Bitcoin bad for the environment?’ becomes ‘How ecologically destructive is our current financial system?’ and ‘Who is paying for these anti-Bitcoin articles?’

Weary millennials tired of explaining cryptocurrency to your parents, this article is for you. Crypto newbies, welcome: This non-financial advice article is for you, too.

1. Why Does Cryptocurrency Have Value?

First off, it’s important for people to understand that cryptocurrencies — like fiat or centralized currencies — vary far and wide in terms of value and stability.

With that in mind, cryptocurrency as technology has value because it can allow you to trade funds with anyone, anywhere in the world without:

1. Trusting the other party.
2. Going through (and paying for) a third party such as a credit card company or bank.
3. Having everyone know what you're doing (though don’t assume that pseudonymous crypto is anonymous).

2. Isn’t Bitcoin Is Terrible for the Environment?

This is true — as is the car your drive, the electricity you use to power your house, the plane trips you take, and the cotton you wear. Everything we do is terrible for the planet, but perhaps not as headline-grabbing. On that subject:

Articles about the environmental cost of Bitcoin forget to calculate the environmental cost of our existing financial system because they are subsidized by that system.

Think of all of the bank-owned buildings ACed and heated 365 days a year, all of the bank employees who drive their gas-fueled cars to work, all of the servers and computers that back our credit card purchases, and all of the infrastructure that goes into making our bank accounts secure.

The financial system already has a huge environmental cost, it’s just harder to calculate.

More specifically, the problem with Bitcoin is how we produce energy. Oil, gas, and coal, making up the majority of our energy sources.

But Bitcoin transactions still require a crazy amount of energy.

This is true — and why a different currency will become the transactional crypto as more businesses and people start using it for smaller, everyday transactions.

Think of Bitcoin as the future of your bank account, rather than your credit card.

3. Aren’t Bitcoin Transactions Too Expensive?

Just like we don’t pay people in pounds of gold or briefcases of dollar bills, Bitcoin transactions aren’t the most efficient way to transfer wealth.

However, Bitcoin remains the safest, most accessible, and one of the stablest of cryptocurrencies (excluding stable coins, which may be “stable” but can be extremely sketchy) out there.

Why does Bitcoin have value? Much like the US Dollar (but without the inflation, limitless supply, and control by a centralized government), Bitcoin has value because it is easy to exchange, safer than alternatives, and has significant buy-in.

4. Will Another Crypto Rise as the Go-To Way to Exchange Wealth?

Like how credit cards replaced hard cash, another crypto into which you can convert your bank account funds (i.e. Bitcoin) will emerge as the go-to exchange currency.

ZCASH (ZEC) is a contender for this role as its structure is similar to Bitcoin’s in terms of safety but it’s much more energy-efficient and has different levels of transaction anonymity. In the black market, Monero (XMR), a truly anonymous crypto, is the currency of choice. Ethereum functions this way within its growing and promising DApp ecosystem.

5. What Will Happen to Bitcoin Long-Term?

You should also be asking: Won’t another government-backed currency supplant the U.S. dollar as the global exchange currency?

Like the USD’s hegemony or the value of stocks (compare the most valuable publicly traded companies in 1960 to today), Bitcoin’s market dominance will not last forever.

If you are looking for a forever investment, neither Bitcoin, nor stocks, nor the U.S.D. is for you.

With that in mind, billions of institutional dollars — Bitcoin’s market cap is 653,000,000,000 as we speak — have piled into BTC with the intention of holding it. A mass exit from Bitcoin would take time — granted, less time than it takes for the U.S. dollar to be devalued, but it won’t happen while you sleep.

6. Is Cryptocurrency Safe?

Cryptocurrency can be wildly unsafe — especially in the early days (think 2010–2017). Valueless coins, pump-and-dump scams, wallet hacks, and massive market manipulation were more common when fewer people and regulators were involved.

If you look to the bottom half of the cryptocurrency market, you’ll find many of these today. Here there be dragons.

But, just like the stock market, investing in cryptocurrency is about risk tolerance. This is why institutional investors have stocked up on Bitcoin and Ethereum, as opposed to questionable alternatives (ahem, Ripple (XRP)).

This is not financial advice: Know your volatility tolerance and make decisions accordingly.

7. Don’t Criminals Use Cryptocurrency?

Yes. They also love the U.S. Dollar.

In a great interview with Tim Ferriss, Katie Haun — former federal prosecutor who worked on the infamous Silk Road case and Mt. Gox hack — explains how they wouldn’t have caught Dread Pirate Robers, the Silk Road’s mastermind, without the immutable Bitcoin ledger.

The Bitcoin blockchain records all transactions in connection with the addresses involved. Once you connect someone’s address to their real-life identity, you know exactly what they’ve done with their crypto.

Most importantly, the Bitcoin blockchain is unchangeable i.e. immutable. This means that you can’t hack into it and delete transaction history; Doing such would require an astronomical amount of computing power.

Haun compares the Bitcoin ledger to banks, where (in the Silk Road case), a shady FBI agent could tell the bank to delete certain records as part of an FBI case, and the bank would comply.

Bitcoin removes human error.

The Questions Around Privacy and Security

But not all cryptocurrencies’ blockchains are like Bitcoin’s.

It is possible to hack into low market cap blockchains — which is called a 51% attack — and change ledgers. Again, this is why people stick with the most prevalent cryptocurrencies.

But, more controversially, cryptocurrency, along with messaging apps like Signal and VPNs, brings up the age-old question of how much privacy people should have.

I am of the opinion that a few bad actors should not strip me of my right to use the game-changing tech that is cryptocurrency or keep marketers away from my messages.

8. What Do Blockchains Do?

Blockchain is a game-changing way to keep records, financial or otherwise, because it’s decentralized and trustless.

• Decentralization: As opposed to software that stores your business’ records with your customers, neither you nor your customers can alter what is recorded by a blockchain ledger.
• Trustless: Thanks to smart contracts — blockchain-based contracts that self-execute between a buyer and seller — you will receive goods the moment you have paid for them, no matter who you’re buying them from or where they are in the world.

9. What Is the Point of Non-Crypto Blockchains?

They are valuable in a variety of complex and global industries, including international supply chain management, legal agreements, real estate transactions, and critical record-keeping (think: land ownership).

In the U.S., using blockchains to record transactions will cut out steep middleman fees: real estate agents, lawyers who mediate between contending parties — great news for the people actually conducting business, and bad news for the middlemen.

In developing countries that have not developed the expensive, wasteful mediating and record-keeping systems that we have, the ability to store who owns/paid for what in a secure, trustless manner would be revolutionary.

Land rights are a major problem in the developing world for lower-income people. Having the rights to the land that they’ve owned, often for generations, would promote development.

10. Aren’t Blockchains a Buzzword?

Blockchain became a buzzword a few years back, but don’t let that convince you that you need a blockchain — or that the technology is only a trend.

Though blockchain is an extremely useful technology, it isn’t great for everything — despite what some VC-backed startups will have you believe.

Blockchains are slower and more expensive to operate than a Sequel database, for instance, meaning that the latter is a better choice unless trustless parties are involved.

Cryptocurrency Forces Us to Ask Big Questions

Cryptocurrency and blockchain are here to stay, though what they hold for the future, no one knows. Whether you invest in cryptocurrency or not, Bitcoin and other currencies provide perspective on how our world operates now, who’s holding the reigns, and how all this might, slowly, and then all at once, come crumbling down.