What does the future of money look like?
A. Multicolored paper currency that looks fresh out of a Monopoly game.
B. Numbers on a computer screen.
C. A digital currency that features an Internet meme as its namesake.
If you answered C, you might be right. Maybe.
There's a new currency in town: Dogecoin. And it was off to a fast start. That is, until a hacker ran off with $12,000 worth of the new cryptocurrency in a hacking of a popular service, Dogewallet.
Is this really our future?
Hacks happen. Recently, a hacker stole millions of Target customers' card numbers and PINs. But with traditional ways to pay, the transactions are reversible. When it comes to an online cryptocurrency, reversing payments is completely impossible.
Some say that's a core part of the cryptocurrency revolution. If transactions are set in stone, merchants can sell products without the risk that an angry customer or cheapskate will reverse the charge. This is, after all, one of the biggest complaints about eBay's PayPal: Customers can request chargebacks long after a transaction has taken place.
That's all fine and dandy, but we're quickly learning that an irreversible currency isn't as great as it may sound. When hackers breached the Dogecoin website, they could quickly and easily move funds to a new account, never to be touched by their original owners' again. And because of the relative anonymity of online currencies, we may never know who stole them.
So, while an irreversible currency does cut down on transaction costs, it doesn't come to much help when, you know, a transaction actually needs to go the other way.
Where the currency goes now
Unlike U.S. dollars, cryptocurrencies aren't held in banks. They're managed by individuals, or stored in so-called wallet services, like the now-hacked and offline Dogewallet.com. That means there's no bank-level security, or insurance from the likes of the FDIC, which insures every bank account in the United States.
In an interesting twist, the Dogewallet founders have promised to refund "investors" of the site as the funds were stored safely. For those who used the service, and undoubtedly lost far more than just a token investment, the status on refunds is up in the air.
The takeaway here is that benefits come with a cost. For anonymous, irrevocable transactions, the price for Dogewallet users was everything they had.
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