In 2017, Bitcoin, a digital currency launched in 2009, monopolized international finance headlines. On 1st January 2017, a Bitcoin was worth 972 USD while one year later, on 1st January 2018, you would have needed to invest 14.000 USD to buy a single token, down from nearly 20.000 USD on 17 December 2017. Considering the same timeframe, its market capitalization rose from 15,5 billion to 233 billion US dollars, after having reached its peak on 17 December 2017 at 335 billion (Cryptocurrency Market Capitalizations).

Bitcoin, however, is just the tip of the iceberg. Underneath there is a whole universe of cryptocurrencies (nearly 1400) which value and market capitalization has skyrocketed in the last months of 2017. At the time of writing, on 8 January 2018, 40 cryptocurrencies have a market capitalization of 1 billion US dollars or more. As of 18 December 2017, they were 29.

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The series on the future of the US Dollar Supremacy

The rise in the value of cryptocurrencies has sparked debates over their potential future consequences for and impacts on the international monetary system: some say that Bitcoin could be a “potential threat” to central-bank-issued fiat currencies (Don Tapscott, Ten cryptocurrency predictions for 2018 from the co-founder of the Blockchain Research Institute, Quartz, 4 January 2018) such as the US Dollar (Danny Bradbury, Congressional Report Warns of Potential Bitcoin Threat to US Dollar, CoinDesk, 9 January 2014) while others, like Jamie Dimon, chief executive of JPMorgan Chase & Co., think that Bitcoin is “a fraud” (David Henry and Anna Irrera,  JP Morgan’s Dimon says Bitcoin “is a fraud”, Reuters, 21 September 2017), which value will eventually collapse.

First of all, what is a cryptocurrency? According to the Cambridge English Dictionary, a cryptocurrency is “a digital currency produced by a public network, rather than any government, that uses cryptography to make sure payments are sent and received safely”. Indeed, cryptography is used to implement the blockchain technology, which is at the base of Bitcoin and other major cryptocurrencies.

This article will explain further what a cryptocurrency is, focusing on the most common underlying technology, the blockchain, and its implementation relative to the top two cryptocurrencies by market capitalization: Bitcoin and Ethereum (respectively at 253 and 118 billion US dollars as of 9 January 2018). We shall also include in our analysis the third most-capitalized crypto: Ripple. It will thus underline commonalities and differences between the three cryptocurrencies, starting highlighting their potential advantages and dangers compared with classical international currencies. It will notably single out one of the main challenges characterizing the Bitcoin phenomenon: energy sustainability.

With the next article, we shall analyse the rise of Bitcoin and other cryptocurrencies, highlighting that climb’s main drivers. In conclusion, we shall try to understand if cryptocurrencies pose a long-term threat to traditional currencies and, therefore, to the US dollar supremacy over the international monetary system.

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Full article 2474 words – approx. 5,5 PAGES 

Featured image: The DigitalArtist, CC0 Creative Commons, via Pixabay

About the author:  Leonardo Frisani (MA Paris) focuses currently on challenges to the US Dollar supremacy. Beyond that, his specialisation is in international security, and his main interests are in geopolitics, macroeconomics, climate change, international energy and history.

Main references

Bradbury,  D. (2014), “Congressional Report Warns of Potential Bitcoin Threat to US Dollar”, CoinDesk, 9 January 2014.

Brown, A. (2013), 10 things you need to know about Ripple, CoinDesk, 17 May 2013.

Cheng, E. (2018), Second-largest cryptocurrency Ripple may have run ahead of itself, CNBC, 5 January 2018.

Gupta, V. (2017), Programmable blockchains in context: Ethereum’s future, by Vinay Gupta, Medium, 1 May 2017.

Henry, D. and Irrera, A. (2017), JPMorgan’s Dimon says bitcoin ‘is a fraud’, Reuters, 21 September 2017.

Kaminska, I. (2018), The Ripple Effect, Financial Times, 5 January 2018.

Katz, L. (2017) Bitcoin Is at Risk of No Longer Being the Biggest Digital Currency, Bloomberg, 31 May 2017.

Kharif. O. and Leising, M. (2017), Bitcoin and Blockchain, Bloomberg, 11 December 2017.

Larson, S. (2018) Cryptocurrency boom: Why everyone is talking about Ripple, CNN, 4 January 2018.

Lee, T. B. (2017), Bitcoin’s insane energy consumption, explained, Ars Technica, 6 December 2017.

Robinson, E. and Leising, M. (2015), Blythe Masters Tells Banks the Blockchain Changes Everything, Bloomberg Markets, 1 September 2015.

Tapscott, D. (2018), “Ten cryptocurrency predictions for 2018 from the co-founder of the Blockchain Research Institute”, Quartz, 4 January 2018.

Thompson, D. (2017), “Bitcoin Is a Delusion That Could Conquer the World”, The Atlantic, 30 November 2017.

Worland, J. (2017), How China Could Shape the Future of Energy, TIME, 14 November 2017.

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