Cryptocurrencies are digital currencies that work under blockchain which secures and controls the transaction that occurs through the network. This was created to send online payment directly without the interface of the banks. This decentralized network was created by Satoshi Nakamoto so that anyone could use it but no one can own it. The first most popular type of cryptocurrency is bitcoin. Other examples of cryptocurrencies are Namecoin, Ethereum, Litecoin, Ripple, Dogecoin or Zcash. The total number of cryptocurrencies sums up to 900 currencies in the market. The use was not known for a long time. Apart from just buying and selling of cryptocurrency, it can also be used to gift, dine, purchase, use for charity and travel. It seemed very confusing for many, but blockchains are just like another database system that records a transaction that happens within. Data are stored in blocks. All information like the transaction, the address of the parties involved, the amount and time the block was created are stored. Cryptocurrencies are created by mining and the once who created them are called miners. This involves a lot of costs. Learning to create mines is complicated as it requires the miners to create protocol (rule) that governs the network, computer which runs software that supports the protocols also required. Mining also involves the process of verifying the data, collecting transaction fees and creating currency supply. Miners also ensure that double spending is not done. The network is designed in such a way that any one miner can edit the transactions. Blockchains are decentralized. So, it has less operating cost than the centralized system but others fixed and variable cost remain high. Bitcoin being one of the most known currencies is listed in the top 30 currencies list.
Now in 2019 many companies like TDS Capital Group have started trading strategies, daily videos on the current market situations and e-books on cryptocurrency that has made it easy for normal customers who don't know about the trading to come and do trading. Educating was their aim so that more people know how the importance of cryptocurrency. They have made sure that the trust issues with money are being seen. The regulations like KYC (Know Your Customers) and AML (Anti Money Laundering) are seen these regulations are what a normal financial institute would go through. They have implemented security measures like SSL (Secure Sockets Layer) encryption. If we see in future printing money can cost for the banks, so banks can prefer to do the transaction over the network. But this cost can be covered by customer deposits. Many customers prefer using more digital cash. The value of these currencies cannot be predicted as the value increase with an increase in price and decreases with a decrease in price. The transaction processed with this network is limited as to only three to four per second. Visa processes 30,000 credit cards in the meantime. The cryptocurrency market can be seen as scary, mysterious and exciting all at once to the people. There was a huge scope when cryptocurrency was introduced as there was a financial crisis all around the world as people lost trust in banks during the crisis.
Advantages and Disadvantages
Cryptocurrencies can be used as a cost-effective and efficient instrument to minimize the risk involved for people who invest in foreign exchange. It is for the people who want to get money fast and is ready to take a lot of risks. It is good for the transfer of money internationally. It doesn't involve is printing, securing and transportation cost. If cryptocurrencies replace fiat currencies, then there is no need to exchange money when you travel to different countries. No need to carry cash you can access. The digital currencies will have same value everywhere. Their benefits have a different opinion in different countries. Some countries find it as a means of illegal transactions of money. One of the main disadvantages is the way the network is being designed. Even though the transaction is said to be anonymous. The block is shared with all the users which make is vulnerable to attacks as access is easily available. Hackers can skim bitcoins during the trade. There are stories of assets being stolen from the network. For cryptocurrencies used in commodities also has a downfall. The values of many commodities vary. This brings fear in the investor as they are not sure of whether to invest or not. The volatility of the currency creates risk which in turn creates trust issues. This is due to the lack of a central body to control them. Frauds have increased due to the faulty system setup by exchange companies. As it doesn't have any Government intervenes acceptance by users is limited. There was an increase in crimes and avoidance of tax payment due to this type of system. Many companies dint understand how this system work and were slow in learning and to react to this system. Many competitors like apple pay and PayPal came up with better and more secure plans. One of its major competitors like dash provide secure, faster and easy mode of payment services. Also, customers found it easier to use mobile to do payments. This reduced the use of bitcoins which was more complicated. Storage of digital currencies is a huge challenge. There need to be assurity that the driver is secure and has space. There is a lot of confusion of which is the best from a variety of digital currencies are available. Cryptocurrency cannot be an ideal form of money in the current market.
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Crypto Crisis
Cryptocurrencies had seen drastic ups and downs in the 10 years since its existence. When there was a boom the sources for cryptocurrency transactions were available for cheap. This includes the computer, electricity and the miner who do the transaction. Since miners were earning easy money. They started competing with each other and started creating more rigs that are powerful and can mine more bitcoins. So, the energy required was enormous. When the value of the cryptocurrency fell, it became difficult to cope up with the expense and cost of the computer's hardware and electricity. Also, the miners were being paid less so many were not ready to work. When the value for cryptocurrencies was high then many miners took huge loans from banks to purchase the computers and technologies for the transaction. They faced a lot of trouble. They wanted to get easy profits but ended up with big losses. This had a ripple effect on many companies and industries who worked around these electronic currencies. A lot of startups launched Initial Coin Offerings (ICOs), a way to start up to raise money, but many governments found it illegal as they were not registered with authorities. Also, the structure of the blockchain that governs Cryptocurrency is less complex which makes the network prone to attacks from hackers. With its downfall also some saw the future in it. Here we can see that although there was a 90% fall in some of the types of cryptocurrencies. And it became more expensive. There were still hopes. Some of the cryptocurrencies like dogecoin were still doing well. The founder of blockchains is working with many authorities to increase the usage of cryptocurrency as a means for their transactions. New York and Chicago money centers have opened regulated trading platforms for cryptocurrencies
What Were Their High Expectations for the Future?
The experts expected that in 2019 many of the financial institutes especially banks would go with this blockchain-based technology for cross border transactions. They are expecting a 25% rise in the use of cryptocurrency by the end of 2030 by Thomas Frey one of the futurists. Many more cryptocurrencies to be introduced. Future people might use cryptocurrencies for remittances rather than fiat money. Many smartphone transactions can be done using cryptocurrencies. They have predicted that fiat currencies life span will be no more than five years. Government agencies will adopt blockchain technology. Government currently maintains a ledger of all accounts manually which making it hectic to handle, with the introduction of blockchain technology data will be managed effectively and will be less time consuming. Government agencies will use cryptocurrencies to manage the cash flow. Government of Estonia has already opted for blockchain for storing all important information about the citizens. Trade exchange house will start using cryptocurrencies for the exchanges. It’s also estimated that not just bitcoin but other cryptocurrencies will be in use and their prices also will increase giving more benefits to the cryptocurrencies market. It’s also said that cryptocurrency will have a major effect on banks. It told that people will start opening cryptocurrency bank account, loans will be provided in the form of cryptocurrencies and also people can buy cryptocurrencies from ATMs. Cryptocurrency debit card also will be in use. It is also predicted that blockchain will help in transfer of money back home faster. It will also help in faster download and transfer of file. The downloaded file will be accessible in the cryptocurrencies’ wallet. These are the few predications for the future of cryptocurrencies by experts.
Is There a Future for Cryptocurrency?
Owning cryptocurrencies can be like cheating. Only those people will buy and sell those who have an appetite for risk. It's too risky for normal and ordinary investors. It enables the parties involved to be anonymous. This currency exists with values set by supply and demand. There are limits to the number of transactions that can be done in each update of the blockchain. What if the transaction goes more than the limit? Each day has millions and millions of transactions that need to be done. This is one of the main limitations. Some money is lost in the market while the transactions. All online transactions are done electrically are based on a factor of trust. Yes, trust is very important when it comes to dealing with transaction especially related to money. No one is ready to take up a big risk. If there is any organization or brand that is ready to legitimize the transaction then there might be an increase in the usage. The verification and the confirmation time over this network are more when compared to the digital payment system like PayPal or any other credit card payment systems. There should be a verified system through which transaction takes place. This would create a trust factor in people and they would be ready to invest more. Many brands like Amazon, Starbucks and have tried investing but dint find much to their support. For the acceptance of such electronic currencies, we need a centralized body just like a central bank. This creates no room for monetary policies. Efficiency is reduced. Another issue is that it has still not found its role as a rival to any payment systems like PayPal, Apple pay or Samsung Pay. Microsoft, Subway and Expedia accepts cryptocurrencies as a mode of payment for their services. It would make a huge difference for financial institutes. There is a possibility that if fiat money and digital money go hand in hand in hand then the operating cost would reduce for financial institutes' and it would be more continent for customers. But in that case, traditional currencies should be superior to digital currencies. Since there is no flexibility for cryptocurrencies it cannot withstand financial crisis. There is a huge risk of opportunities. They are working hard on stabilizing the model for better use. Many companies are coming with new ideas. If they were backed up by sovereignty then there might be a lot of scopes. Cryptocurrencies should increase their value. They can do so by introducing it to cooperate with a lot of security and protection. This protection should not only be for vendors but also for the users. They should increase their creditability for the wider financial market. It puts a lot of pressure on communities of stakeholders and developers of the networks. Developers work on codes for a business that in turn needs to work to clear statements to the user.
Conclusion
The cryptocurrency market is striving to get a push by innovation and by fixing all their flaws. Owning cryptocurrency can feel like cheating. The flow of fund might look easy as the track is through Internet technology. Yes, it has a lot of advantages, but disadvantages outrage them. Fiat money is considered as a legal tender but electronic currencies cannot be considered legal. It is a disruptor to banks and financial institutions. This would help in reducing the operating cost of banks. But there is a need for a bank to compete for the developments of the country. It affects the inflation and functioning of the monetary systems. The banking system always helps in financial flow. The technology used in cryptocurrency is designed to avoid the involvement of trusted third parties. If cryptocurrencies come into being as the only payment system, then there might be the elimination of banks. This might be bad for a nation. Regulation should be firm which will help in certainty and credibility; this will increase the investor's rate exponentially. Another issue is the need for miners who should have good knowledge. This involves cost as money is needed to pay them. So, if there are no miners then there is no future for cryptocurrency as a future. Cryptocurrency won't be cash we would require the Internet all the time to stay in the network. Cryptocurrency is not something that you would use to buy regular groceries. Frauds and hacking will increase as everything happens in a technical network. Many retailers have started giving an option of payments as cryptocurrencies. But not many are ready to take the risk. Good currency is the one that has stable purchasing power, but cryptocurrencies demand depends on its price. This attracts countries which are economically unstable. Yes, if there is a regulatory body to govern the transaction of all the cryptocurrencies then yes, it could be the future. As of now, there is no such body or any improvement in their security system. Since its fall is predicted that in 2020 the demand will be reduced to half. It involves a lot of risks. To eliminate traditional cash, then the whole infrastructure needs to be changed. So, it needs to go a long way to be popular and become the future.
References
- https://money.com/the-future-of-cryptocurrency/
- https://cryptonews.com/exclusives/crypto-2020-how-adoption-will-look-next-year-and-beyond-5037.htm
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