A cryptocurrency or digital currency is essentially virtual funding managed by sophisticated encryption methods, collectively known as cryptography.
It first manifested back in 2009 in the form of bitcoin and subsequently, there have been hundreds more that have followed.
While the number of users of Bitcoin has been growing rapidly since its inception, it really became a subject of immense media scrutiny in April of 2013 when it reached a record peak of $266 per coin which was a 10-fold expansion from a previous couple of months.
At its peak, Bitcoin retained a market value of up to $2 billion but subsequently sustained a 50% plunge which was more or less the spark to an intense and ongoing debate regarding the idea of a cryptocurrency future in general. Will we one day make the leap from the use of tangible fiscal currencies to virtual currencies that will be traded entirely over the internet? If so, what should we expect? The key factor to look at here is Bitcoin.
The Current Benchmark
Bitcoin sets the standard by which all other cryptocurrencies are measured. In fact, most other prominent cryptocurrencies promote themselves, citing those attributes they have which are not available on the Bitcoin network.
Bitcoin is a kind of decentralized cryptocurrency using peer-to-peer technology and enabling all of its functions to be executed by the network itself. Said functions include issuing of currency, processing and verifying transactions.
With no interference from any government authority, the digital production of Bitcoin is the result of a so-called ‘mining’ process dependent on powerful computers that can solve complicated algorithms.
All of this just goes to show that Bitcoin differs from any fiat currency even on an elementary level. All fiat currencies have a centralized authority to supervise it, such as the central bank.
Heightening Media Scrutiny
The main attributes of Bitcoin, decentralization, and anonymity for transactions, have backfired as they have made it a famed choice for various illegal operations such as money laundering, smuggling, drug peddling, and the provision of assault weapons.
This has obviously aroused the attention of government agencies like the FinCEN, FBI, SEC, and DHS.
With Bitcoin’s success as the first ever cryptocurrency, others have swiftly followed after it, albeit with the intention of toppling it altogether as the most prominent cryptocurrency in existence. Here is a list of a few of those well-known alternative cryptocurrencies.
- Ethereum (ETC)
- Litecoin (LTC)
- Ripple (XRP)
- Monero (XMR)
If you are interested in investing in cryptocurrencies the easiest way is via exchanges like Binance or cryptocurrency brokers. Check out our informational article on sending and receiving Bitcoin if you’re not sure how to do it.
What Does a Cryptocurrency Future Hold?
There are a quite a few pressing concerns with cryptocurrencies that limit their appeal to traders.
The fact that you can make a fortune online and have it taken away from you due to a crashed computer or the activities of a hacker is enough to deter many.
While new and improved safety mechanisms against these threats are being developed all the time, so are the methods for defying them. Plus, cryptocurrencies are only going to draw more attention from the public as they continue to grow.
Nevertheless, the number of traders that use cryptocurrencies has been on the increase. However, they still remain as part of a minority in the overall trading population.
Cryptocurrencies are still very much the underdogs of online trading but they certainly have the potential to change the way we all think about money.
Being more complex relative to fiat currencies, they can be a definite reject for most traders, but as we become more familiar with the technology, they may well replace fiat currencies altogether.
But there is still plenty left to accomplish for that to happen. For instance, the complexity of the algorithms behind cryptocurrencies would have to increase in order to reduce the risk of fraud and hacking.
Meanwhile, they would also have to be simple enough for consumers to make sense of. Go figure. On top of that paradox, they would have to preserve the anonymity of users without serving as a tool for evading tax payments. That is a lot to live up to for such algorithms.
So far, even Bitcoin has not managed to overcome this challenge and that could prove to be a deciding factor regarding its future and a cryptocurrency future in general.
The debate regarding the future of cryptocurrencies has been ongoing since the debut of Bitcoin on the online trading scene in 2009.
The trading community remains split on the issue. What we do know is that in order for Bitcoin to be accepted as a mainstream financial network, it must first meet the tall demands for safety and efficiency that are expected of it.
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