The crypto crash – reasons behind the recent crises of cryptocurrency

Cryptocurrency which is still an exotic form of currency for many people has experienced a severe crises recently. Actually, it made many investors literally shocked by the drop in the value of modern cryptocurrencies. For instance, ether invented by 27-year-old Vitalik Buterin has lost more than 40% of its value since Tuesday reaching the value below $1900. Even though it was capable of regaining its value coming up to the amount of $2700, it is still a way smaller than the value of $4384 which was registered on May 11.

So far, the only ether’s rival is bitcoin so its importance on the scene of cryptocurrency is extremely important. While bitcoin is considered to be a digital form of gold, ether is based on ethereum which is used by developers as a platform using the block-chain technology for creating and operating applications. The meaning of this platform for the world of cryptospace is the same as the role of Android for mobile developers.

The role of governments in the cryptocurrency crash

The crash of cryptocurrencies can be triggered fairly simply especially if governments break into the flow. In the case of the current event, experts link the situation to the crackdown which has recently happened in China. Here, a small group of political influencers decided that for the payment organisations as well as financial institutions operating in their country providing clients with services related to cryptocurrencies including performing transactions in these digital means of payment should be forbidden.

Even though the nature of the blockchain is not centralised which prevents governments from acquiring a complete control over this sector, they are still rather powerful and can influence the crypto world immensely.

The ether cocreator on the crypto currency crises

According to Vitalik Buterin who himself experienced a real financial crash because of the decrease of value of his own cryptocurrency having its funds decreasing to the amount of 870 USD from nearly 1.1 billion USD believes it was a natural situation for the digital currency. He himself calls this currency “a bubble” and believes it is normal for it to come over the cycles of booms and busts. The world events causing such fluctuations in the value of the strongest cryptocurrencies are signalling of the technology imperfection according to Vitalik.

Cryptocurrency mining and the climate changes

Not everyone is aware of the fact how energy-consuming mining is. Just imagine, according to estimations of Vitalik Buterin, the consumption of energy for ether mining had been equal to that consumed by a country of a medium size before the change of technology from the proof of work to the proof of stake. Needless to say, mining has a tremendous impact on nature requiring thus much electric energy. That is why improving the technology is crucial and in case of ether, it was possible to reduce the overall consumption to the amount comparable to the consumption of energy made by a village.

Because of that difference, certain environmental concerns occur around bitcoin. Of course, the worries are related to the energy consumed by the process of mining of bitcoins in the first place. According to Buterin, the technology used by bitcoin will soon have to adapt in order to participate in the technological progress. For this, there are two options. The first one, is like it has been done in the case of ether, switching to the proof of stake. Another possibility is using a hybrid technology.

Not changing the technology, the bitcoin mining sector of the cryptocurrency scene is risking to lose its position significantly.