By late 2000, there was already hint here and there of a type of virtual currency rumored to hold a potential of taking over world currency. When a few people learnt of the possibilities and potentials it holds for the future, some smartly took the leap of faith and made investments. At the time it took real visionaries to take the risk, but hey, that’s life. Not everyone can see the future of things like this and even amongst the few who were wise enough to see it, fewer had the courage to stake a few dollars.
The summary of what has happened through the few years of its existence is that cryptocurrency is gaining grounds and more governments and individuals are embracing it. Others have decided to resist the move but it’s difficult and the odds seem to be against them. You may or may not have heard of more specific names for cryptocurrency like bitcoin or litecoin but you should have heard of the term “cryptocurrency”. Several other people understand that there is such a thing as bitcoin currency and know how it operates but hardly know that there are others of its kind and a general name for them all.
Cryptocurrency (a rundown)
You can think of cryptocurrency as an umbrella term for different virtual currencies which can actually be used for purchases and online payments. Imagine going online and shopping from any site and making all your payments with a universal currency. We all know that now more than ever, the sales and purchase of goods is taking place online. Online markets could possibly boom by taking advantage of the promising future of all cryptocurrency values. It is a simple but quite efficient way to transfer assets from one entity to another using a cryptographic system which secures transaction and regulates creation of additional units of the various currencies. They are basically a type of digital currency and the ones that seem to have the potential of taking over the world and possibly replacing cash system.
How and who started it
The name Satoshi Nakamoto belongs to the man (or group of people) credited for haven created the first ever cryptocurrency – Bitcoin as it is called. It also happens to be the most important and most popular of all cryptocurrency today. Satoshi Nakamoto, who no one really knows did not really have any intentions of creating a currency at the time when he realized this achievement. The aim was to invent an electronic cash system that could prevent double spending and was not liable to the control of any server, government or regulatory body. But it turned out to be far morethan that.
Cryptocurrency has become such a popular phenomenon that even nations and the largest banks in the world are showing great interest in it. Not necessarily because they are interested in promoting it. For most of these nations and banks, it poses a serious threat now which if not dealt with timely and properly may spell their doom. As far as nations and banks are concerned, the emergence of cryptocurrency means that Federal Reserve System or government control and regulation of fiat money supply and use will be unnecessary. And no government likes the idea of having their citizens use finances they cannot control in any way.
Why it is gaining grounds and the possibility of it taking over fiat money
The real reasons why cryptocurrency is gaining grounds and making many stakeholders of fiat money nervous has to do with its advantages. These advantages of course seem to be in favor of a general good. Apart from bitcoin price today and the increase in its value along with other cryptocurrencies, here are some advantages of all cryptocurrency which are also reasons why it is gaining much grounds. At the end of the day, we have to acknowledge that adopting a system of carrying out transactions and which could be a replacement for money is a choice that has to made after closely considering the advantages and disadvantages that it poses.
Cryptocurrency and the Inflation Problem
Unlike fiat money, It is unlikely that cryptocurrency values will experience an inflation for some simple reasons. First the production of cryptocurrency is not something left in the hands of a government which can decide at any time to increase or decrease production. The decision to print more money is not simply left to be determined by the economic need that may arise. Policies regarding stability of money supply are delegated to officials charged with keeping things stable. However, these policies are not always executed as planned. Even the methods employed by the Federal Reserve System to manage inflation such as discount rates and open market operations are very inadequate in dealing with long term inflation issues.
There is always a limited number of bitcoins that can be created and miners, who are responsible for the creation of bitcoins as well as sealing transactions have to come to a consensus to increase the number of bitcoins available at a time. This seems to be the major factor affecting bitcoin price today. More interesting is the fact that there is an overall limitation to the number of bitcoins which can possibly be created and it is being minted at decreasing fixed rates every four years. When the limit is finally reached, there can only be continued deflation if there is loss of bitcoins and that too is unlikely. The limitations in its total production has serious impact on bitcoin exchange rate and bitcoin price today.
Though many people fret about the possibility of hacks and online theft here and there, it is altogether difficult, if at all possible to carry out fraudulent transactions with cryptocurrency. But let’s assume for a moment that it is possible. In that case we can still be sure that it is at least going to be a more secure system to entrust your cash or assets to.
Cryptocurrencies are secured with digital encryption which makes it very difficult to steal. So many transactions happen online today and security of one’s assets is a major issue of concern. However, the best possible way to ensure safety amidst these numerous online transactions is to use cryptocurrency.
Making transactions online is already too expensive and middlemen like lawyers or brokers make things worse. With Bitcoin currency however, there is no need for any middle man. Since all cryptocurrency systems function like a database and needs no intermediary to seal deals or solve disputes, you have the liberty to carry out transactions that are cost free.
More so, the possibility of universal recognition associated with cryptocurrency values makes it possible for you to make international transactions without having issues with exchanging currency. First of all, it is risky to make exchanges especially when you have to do it frequently because frequent changes in rates may lead to considerable money loss. Minus that one often has to pay charges. All these difficulties are eliminated by the use of cryptocurrency since it is universally accepted at a specific value. We have to bear in mind that, though bitcoin exchange rate for example may have an international value which is converted directly to any currency, there are frequent fluctuations in that international value. With the increase in its adoption in countries, we may soon come to a point where all these troubles will be a thing of the past.
Absolute Personal control
Unlike banking systems where you are subject to certain conditions and policies which may change to your disfavor, you don’t have anyone controlling your assets or money with cryptocurrency. You have absolute control over your finances and can make changes, have access and make purchases at any time you deem necessary.
Credit cards operate on pull basis. This simply means when you make purchases with your credit card and give the card to a sales person who takes out the money from your account, he or she has access to your personal information. Cryptocurrency on the other hand can be said to operate on a push basis. When you make payments using cryptocurrency, there is no information about you given. Just the money. Hence your identity is really not associated with your account and cannot be gotten through it. This may leave you wondering what hold or control you really have over the account seeing that your identity as a person is not associated with it the same way it is with the credit card. It is simple. With all cryptocurrency your identity is encrypted, meaning your access and ownership is a matter of digits and letters that make up a unique code which you and only you can use.
Disadvantages of Cryptocurrency
Though the advantages of using cryptocurrency seem encouraging and from them one will like to conclude that cryptocurrency will definitely take over the world, the disadvantages may make you reconsider your options. Let’s look at some of the disadvantages of cryptocurrency and by Implications reasons why it may not take over the world and its economic system as many are almost certain it will.
The shortcoming of its lack of regulation or control
No matter how much we resent government and banks’ control over finances, it is good to realize the role all of this play in maintaining order. Control and stability in the economy of a nation, and more so in the world is a big issue. One that cannot just be left to the fate of a system that seeks to minimize control. The lack of control by governments and other regulatory bodies could lead to unresolvable chaos. Many governments are still very resistant to the adoption of cryptocurrency because of this issue amongst others.
Taxes are animportant part of every nation’s economy and whether you are paying them directly or indirectly, the government of nations will not take the possibility of a task free economy lightly. If cryptocurrency were to replace money, tax evasion will be a simple thing since there will be no way to have control over the finances of the people. The only alternative then will be to break some protocols and that will definitely destroy the core value of the system. There are already employees who pay their workers through cryptocurrency to avoid liability for payroll taxes.
Risk of Loss
Because of the tight measures of control, losing your cryptocurrency identity means a permanent loss of all your assets there. There is no possibility of reversing such a condition and you cannot take the matter to anyone for help. Not the government, the miners or any other person for that matter. There is no way anyone can help you. Considering the fact that most cryptocurrency users save their private keys on their phones or other such digital devices, they stand the risk of losing everything should the device get missing before they have copied it.
Instability of Prices or value
Since cryptocurrencies and Bitcoin in particular became popular there have been some very serious swings in value that may just make you hold back your hand if you were considering investing in this trending “get rich quick” scheme as some people describe it. The volatility of cryptocurrencies is a great call for concern. Let’s take the case of changes in this year’s bitcoin exchange rate for example.
At the beginning of the year, mid-January to be precise, the value of one Bitcoin was $800. That price went up to $3,000 by June (more than triple) only to experience another drop to $2,000 just one month later. Then in September the value of one bitcoin again rose to $5,000 and dropped again to $3,200 just two weeks after that. As at the time of writing this article (November 22, 2017), one Bitcoin is worth a little over $8,200. The truth is, this could change after an hour or a day. Bottom line remains that the fluctuations in cryptocurrency values or prices make it not just a risky venture to invest in – especially when you are putting lots of money – but the instability is also not good for a currency and especially for the world’s economy. As far as this point is concerned, investing in bitcoin and other cryptocurrencies or altcoins as they are called is much like investing in the stock exchange market where prices are always subject to changes and can have serious effects on one’s assets. Studying bitcoin exchange rate is therefore essential to understanding the market before staking a dime.
Not Very easy to understand, unlike fiat money
There is not much to understand when we talk about fiat money. It is quite basic, the central bank prints physical cash according to its judgments regarding the needs of the economy at the time. The money once in circulation gets in to the hands of people and banks. It can be held as cash in hand and actually used as a medium of exchange. The process is simple, exchange value for money. Unfortunately, we cannot say the same thing about cryptocurrency.
First there is the trading in the currency itself. That means the currency has to be purchased and then used to purchase. If one decided to get into the cryptocurrency train today, they will first have to buy the currency, or at least its value before using that value to make either make purchases or hold it as an asset online, hoping that the value increases. Then there is the issue with how these coins are made, who is making them, who regulates their production and even how people can get them. Truly there are many people who have not taking the dive into the crypto pool because they lack knowledge about these things.
Some inportant cryptocurrency types
Bitcoin currency is the first and most popular cryptocurrency in existence today. It was founded by Satoshi Nakamoto, a person whose identity no one know. Some suggest it is a group of people but it is most probable that the name refers to an individual. Whatever the case, it first started being used in 2009 when the first bitcoin was mined. Since then there has been increase in the production of bitcoins but not without an increase in its value too. By late 2016, one bitcoin was worth $770 and in just a little while that amount has risen to more than a thousand Dollars today. Bitcoin exchange rate fluctuations is probably the most significant thing about it. As far as the cryptocurrency race for prominence is concerned, Bitcoin is still holding the lead since it was created and bitcoin price today has risen to above $5000.
The third most important cryptocurrency today is the Litecoin which was created in 2011 by former Google engineer Charlie Lee. Since its creation, litecoin has been one of the major competitors of Bitcoin currency and seems to be gaining even more grounds. Litecoin uses script as its proof of work and uses the open source cryptographic protocol. Aside from the fact that the payment costs for litecoin are minimal, it is said to be four times faster than bitcoin currency with regards to transactions. More specifically Litecoin is designed to process a block within just 2.5 minutes as opposed to Bitcoin which takes 10 minutes.
Ethereum is largely popular because of its additional advantage of being more than just a digital currency. It is actually used by software developers to code and also power software using the public block chain. Ethereum was launched in 2015 and has since then gained a lot of grounds fighting its way to prominence amongst the most popular and important cryptocurrencies, with Ethereum though, ethers are used to codify, secure, decentralize and trade different things. It is one cryptocurrency type which is used mostly by developers. In 2016, an attack on the DOA left Ethereum split in two. Ethereum and Ethereum Classic. Today, Ethereum has gained a market capitalization worth of $4.46 Billion and trails only the famous Bitcoin.
It was originally called Darkcoin, developed by Evan Duffield and launched in January 2014. Shortly after that, there was a considerable increase in its fan following. The uniqueness of Dash or its primary difference from Bitcoin is related to its offer of better anonymity by working on a decentralized master code network that secures transactions and makes them almost impossible to trace. Its name was changed from Darkcoin to Dash – a cooler name of course – which simply means Digital Cash. The rebranding however was not accompanied by any changes in the currency’s digital features.
Offering instant low cost international payment opportunity, Ripple is a global settlement network. It makes it possible for banks to settle international payments with transparency and reduced expenditure. It has gained market capitalization of $1.26 Billion since its release in 2012. Interestingly it is one of the very few cryptocurrency types that do not follow after Bitcoin’s mining technique to create coins. The method of conformation here is called a consensus ledger and the absence of a mining process reduces the necessity for computing power as far its development is concerned.
There are already several companies created which deal in cryptocurrencies. Companies like Javi, Divi projects, Stream Token and Monetha have taken advantage of the whole cryptocurrency uprising to make a fortune out of it while they help people understand and get into the cryptocurrency train. It is usually about getting what they call wallets which help you manage your crypto investments.
To settle on whether or not cryptocurrency is going to take over the world is not something one can quite certainly decide on. There are advantages and disadvantages which ague for and against the use of cryptocurrency. Looking at bitcoin price today for example, coupled with fluctuations and uncertainties in the whole cryptocurrency values and market, there are enough reasons to say that cryptocurrency certainly does not have enough grounds to take over the world. On the other hand, though, the number of people who are becoming interested recently, coupled with some governments’ passive approval, it seems cryptocurrency will become a major international currency.