A cryptocurrency is a digital or virtual currency that is protected by cryptography, making counterfeiting and double-spending nearly impossible. At the moment, they are a huge investment opportunity with many people using it as wealth builder to grow their investments. Many cryptocurrencies are based on blockchain technology, which is a distributed ledger implemented by a distributed network of computers. The term “cryptocurrency” comes from the encryption techniques which are used to keep the network secure. Cryptocurrencies are distinguished by the fact that they are not distributed by any central authority, making them technically immune to government intervention or exploitation. Cryptocurrencies are usually created as code by teams that include processes for issuance (often, though not always, via a process known as “mining”) and other controls. While some cryptocurrencies have entered the physical world through credit cards or other ventures, the vast majority of cryptocurrencies remain completely intangible.
Why is Cryptocurrency so popular nowadays?
Cryptocurrency is something that has been a hot topic of discussion for several years now, with people looking to Dash kaufen online so they can diversify their portfolio with various types of cryptocurrency investments. Most people are familiar with cryptocurrencies, and some might even purchase Bitcoin from time to time. There are a number of reasons why Bitcoin has become so popular recently but is it really the best cryptocurrency to buy now? One of the main reasons why the cryptocurrency is so popular around the world is that it has very low transaction fees. The very low fees that people have to deal with when using various cryptocurrencies make sense for them to use cryptocurrencies to pay for items online and lots of people also find it to be secure.
Another good reason why people trust cryptocurrencies is that these currencies aren’t linked to any world governments. This ensures that cryptocurrencies have the potential to remain stable even when there is turmoil in a specific country. Because more online companies are adopting cryptocurrency, it is becoming easier to use. More websites are beginning to accept cryptocurrencies as payment, and this trend will only continue to grow in the future. As cryptocurrency continues to become more common, it’s going to reach more and more people. As a result, there is a rise in visibility and overall popularity.
Bitcoin
Bitcoin is considered the original cryptocurrency, and its introduction in 2009 was the catalyst for the whole cryptocurrency revolution. A person or group of individuals operating under the pseudonym Satoshi Nakamoto invented Bitcoin and the blockchain technology on which it is based. Bitcoin was proposed as a possible replacement for the fiat monetary system. Satoshi Nakamoto’s real identity has never been revealed. Nakamoto claimed in the Bitcoin whitepaper that a fiat monetary system dominated by central banks and a small number of financial institutions resulted in a concentration of wealth and power, making social and financial mobility difficult. Inflation drained ordinary people’s wealth, largely as a result of central banks’ money printing. Bitcoin solved this problem by limiting the number of units ever issued, thereby preventing money printing-induced inflation. Since Bitcoin uses peer-to-peer blockchain technology, it does not require financial institutions to facilitate transactions or verify ownership. Bitcoin is still by far the most popular cryptocurrency and its price movement has a significant influence on the rest of the crypto market.
Ethereum
Ethereum is historically the second most popular cryptocurrency, but it is not the same as Bitcoin. Ether is the name of the coin, and Ethereum is the name of the blockchain network. Ethereum is a blockchain platform that allows for the development of ‘smart contracts.’ They can also be thought of as pre-defined “laws” on which a variety of applications, or Dapps (decentralized applications), can be built. Ethereum Dapps range from games to Initial Coin Offerings (ICOs), which are the cryptocurrency world’s equivalent to crowdfunding or IPOs. While other smart contract platforms have emerged after Ethereum, each claiming to provide more advanced blockchain technology, the initial blockchain remains the most widely used. Although Bitcoin is designed to be a substitute for conventional fiat currencies, Ether’s primary aim (aside from being exchanged as an asset) is to be used to pay for the Ethereum network. It’s referred to as a ‘utility’ cryptocurrency.
Ripple XRP
Another ‘utility’ coin is Ripple XRP. Its blockchain platform is designed to make cross-border fiat currency transactions more effective. Ripple XRP, which has been closely linked to and funded by a variety of banks since its inception, is sometimes referred to as the ‘establishment’ cryptocurrency. Ripple’s network and uptake of the currency has steadily increased over time as you can now buy ripple on Independent Reserve and other major platforms. It is possible that it will eventually become a part of the conventional financial system.
Other Cryptocurrencies
Since the start of the cryptocurrency craze, the two most popular cryptos have been Bitcoin and Ethereum (Ether). However, there are plenty of others to choose from. As of March 30, 2021, the top 3 cryptocurrencies as per market capitalization are Bitcoin, Ethereum/Ethereum 2, and Binance Coin. Other coins in the top 10 list include Tether, Cardano, Polkadot, XRP, Uniswap, Litecoin and THETA.
Cons of Cryptocurrency
Perhaps the most challenging barrier in terms of large-scale adoption of the various cryptocurrency options, is the fact it can be a complicated subject to grasp. The idea of a decentralized financial system stored on blockchain may be intimidating, especially if someone is not tech-savvy. Due to the fact that it can be incomprehensible at times, people are proving to be very wary of taking advantage of the benefits that it can provide. Another disadvantage of cryptocurrency is that the price of virtual currencies fluctuates on a regular basis. A single bitcoin was worth $1,000 at the start of 2017. It was almost $20,000 a year later.
By mid-2018, it had fallen to about $5,000. The majority of people using cryptocurrencies are simply waiting for the dramatic market fluctuations to work in their favor. As with any financial vehicle, particularly one that is highly volatile and has piqued incredible public interest, there are opportunities for bad actors to defraud investors. Cryptocurrency fraud can come in many forms, including Financial Crimes, Scam Initial Coin Offerings, Pump and Dump Schemes, Market Manipulation, Ponzi Schemes, Traditional Theft, Broker/Dealer Fraud, and Unscrupulous Promotors.
Cryptocurrency in Global Banking
According to a recent study from accounting firm KPMG, central banks in Asia and Europe are on the verge of introducing digital currencies for future payment systems and cross-border transactions. Governments all over the world see the introduction of these blockchain-based central bank digital currencies (CBDC) as a way to gain a strategic edge in global trade. China is reportedly close to launching a national cryptocurrency that could challenge the US dollar as the de facto currency for foreign trade due to greater efficiencies. Other smaller countries, such as Sweden, are considering launching their own cryptocurrency. (In Sweden, it would be called the e-Krona.)
Regardless of any movement by central banks, the private sector is already issuing fiat-based ‘stable-coins’ to enable enhanced value exchange and settlement within organizations and across banking networks. JP Morgan Chase, for example, revealed in 2019 that it had created the first cryptocurrency backed by a major bank, a development that could legitimize blockchain as a vehicle for fiat cryptocurrencies. JPM Coin, as the bank refers to its new digital money, is considered fiat currency because it’s backed by U.S. dollars in accounts designated at JPMorgan Chase N.A. Each JPM Coin is equal in value to one U.S. dollar. Wells Fargo has also announced that it will pilot its own cryptocurrency in order to allow near real-time money movement and eliminate middlemen, thereby lowering fees.
The Future of Cryptocurrency
It appears that cryptocurrency is on its way to becoming more widely accepted. Although there might be some improvements and hiccups along the way, cryptocurrencies and blockchain technology are expected to grow in popularity. Big investment banks such as Goldman Sachs and JP Morgan are paying attention to it and supporting it. It’s a high-risk investment vehicle that’s gaining traction around the world. It’s impossible to predict whether cryptocurrencies would outperform or underperform conventional assets. But there’s little doubt that Bitcoin and other cryptocurrencies are here to stay.
By Musarrat Sarwar Chowdhury
