DENVER — Even for the skeptics, cryptocurrency has become hard to ignore, especially in Colorado.

It's total transaction volume grew to 15.8 trillion in 2021, which is more than 500 percent from totals in 2020.

The question is no longer if it will be used in local state economies, but rather a matter of when. In Colorado, that historic step begins this summer.

The crypto showdown

By now, millions have seen the viral videos circulating social media showing average people making huge returns from investments in cryptocurrency, while others have lost it all.

It's not a surprise. Cryptocurrency is a very volatile digital currency. It isn't regulated by a central government or bank. Rather, it's backed by an online distributed database known as the blockchain. Cryptocurrency holders can send the currency back and forth without an intermediary.

The value of cryptocurrency has continued to grow within the last decade, and it's currently worth about two trillion dollars.

Crypto enthusiasts are quick to point out that inflation in the U.S. just reached a 40-year high, while the value of the dollar continues to decrease year after year.

"The point is, life is getting more expensive," said Jarrett Abraham, the director of corporate development at SALT. "It's getting more clear that sitting in dollars presents challenges. So people are looking for other vehicles to store their wealth across time and space."

Colorado's stride to lead the crypto race

While many local governments are questioning the applications, uses and future of cryptocurrency and blockchain technology, Governor Jared Polis has been at the forefront of positioning Colorado to be a model for the rest of the nation.

"We've been laying the groundwork to be a center of crypto innovation and blockchain innovation for a number of years," Polis said during a speech back in February at EthDenver, the world's largest blockchain technology and software development competition, located in Denver.

Polis launched the Congressional Blockchain Caucus in 2016, which serves as a platform where government can study blockchain technology and Congress' role in its progress.

In 2019, Polis passed the Colorado Digital Token Act, which allows certain cryptocurrencies to have securities exemptions.

Now, the fruition of that groundwork Polis set forth is here.

"Colorado will become the first state to accept cryptocurrencies for payment of state taxes and fees," Polis said.

That will be an option this summer, but how will that work exactly?

"Cryptocurrency does have volatility... we look at minimizing risk to the state," said Mark Ferrandino, executive director of Colorado's Department of Revenue. "Someone who would want to pay their taxes through cryptocurrency would go to an exchange, facilitate that payment through the exchange and then that exchange would convert the cryptocurrency into cash and then that cash would come into the state."

Essentially, the state will not be holding cryptocurrency. Every tax payment made with cryptocurrency will be immediately converted into cash.

"It allows businesses or individuals who have cryptocurrency to be able to pay their taxes in a more seamless way," Ferrandino said.

But is this really about a more convenient way to pay taxes?

Attracting innovation and more business

Those who have already invested in cryptocurrency will tell you the state's plan goes much further.

"You are now selling a product," Abraham said. "You're selling your jurisdiction, you're selling it to entrepreneurs and capital and innovators so that they can build businesses there and impact the economy in a positive way."

Abraham's company allows people to put up their cryptocurrency as collateralin exchange for a loan.

"Let's say you're looking at a million dollar property and you want to put 10 percent down. A really quick and easy way to get liquidity would be to come to someone like us," Abraham said.

After all, confidence grows for innovative businesses like this when state governments support its premise in general.

"This next wave of innovation will bring even more talent, more capital, more jobs and everyone's fighting for that," Abraham said.

The skeptics

Not everyone is sold on the idea Colorado is pushing.

"It's really a buyer beware type of Wild West out there right now," said Todd Phillips, director of financial regulation at the Center for American Progress. "We are a think tank. We really dig into public policies to try to understand what the potential implications of different things are... I think that investors need to be very wary of what they invest their money in. Right now, there are very, very little consumer and investor protections protecting people, unlike in the stock market."

Phillips also points out that the race to become the nation's most crypto-friendly state is also a race for scammers to take advantage.

"The crypto market is just ripe with all of these scams and abuses," Phillips said.

From market manipulation, fraud and rug pulls, to adding new twists to old scams using crypto, the FBI says the losses were in the hundreds of millions last year alone.

Some victims like Denver resident Steve Belcher lost everything.

"It's almost surreal," Belcher told Denver7.

Belcher thought he was investing Bitcoin on a legitimate exchange that ended up being a big fraud. His life savings of $1.6 million — gone.

"It's devastating. I mean, emotionally, physically, there was days that I didn't want to get out of bed," Belcher said.

The chances of getting money back in these types of scams are slim to none.

As Phillips points out, the learning curve will take some time to sort out.

"We are still at the very frontier of trying to understand how to investigate scams, how to figure out who is behind the scams and how to get people their money back," Phillips said.

It will take time to get there. With any new technology, that's expected. Consider the creation of the Internet in the late 80s and early 90s. Understanding how to efficiently and effectively enforce law in that space didn't happen over night.

With that, both supporters and opponents agree — proceed with caution and don't invest what you're not comfortable losing.

Editor's Note: Denver7 360 | In-Depth explores multiple sides of the topics that matter most to Coloradans, bringing in different perspectives so you can make up your own mind about the issues. To comment on this or other 360 In-Depth stories, email us at 360@TheDenverChannel.com or use this form. See more 360 | In-Depth stories here.