To begin with, Cryptocurrency is a form of a currency that is ‘digitalized’. Technological advancements have made the management of cryptocurrency easy through an encryption technique called Cryptography. It was back in 2009 when a simple academic concept took the shape of Bitcoin, and thus, the name of cryptocurrency gained popularity opening new frontiers that took it to great heights. Recently, the concept of Bitcoin has sparked a great deal of enthusiasm among people who were intrigued by its record of reaching up to a $266 per bitcoin a few years ago. Shortly afterwards, however, a small plunge in the value of bitcoin started a heated debate among interested people and those who largely opposed the concept. The question, however, remains where it was. Will this newly hyped up ‘digital currency’ replace our very own conventional notes or is it just a fad which will soon be all over and we come to face the brutal consequences? In order to validly and convincingly answer this question, we need to understand a few more things about this currency.
The technology that bitcoin uses to issue currency and carry out transactions frees the currency from government manipulation. One downside of this is the fact that there is no one to ensure that everything goes seamlessly right and that Bitcoin’s value is backed up. These are the most subjects that make customers skeptical.
Bitcoins are created digitally through a process that is referred to as ‘mining’. This process involves the use of complex algorithms and crunch numbers to form a currency as unpredictable as this. Currently, the bitcoins are created at the rate of 25:10. This means that a customer makes 25 bitcoins every ten minutes. It is expected to reach a level of 2140 million in good time.
Since bitcoin is run on a system too risky, it might sound satisfying to hear that it’s very different from fiat currency in a way that Fiat currency is credible and backed by faith in the government and the central bank. On the other hand, there is no set policy that should determine the increase or decrease in the issuance of cryptocurrency. Bitcoin also has no system of backups or support mechanisms like our very own fiat currency. This is because the value of bitcoin is dependent on the amount that investors are willing to exchange them for.
The increased hype of the Bitcoin led to the Governmental agencies actively participate in the scrutiny of the entire mechanism and its outcomes. It has been found that because of the primary benefits of decentralization and anonymity of transaction, a number of illegal activities have been taking place underground. Such unethical and undesirable activities involve money laundering, smuggling, weapon procurement and drug peddling. In one instance, back in 2013, the Financial Crimes Enforcement Network brought the administrators of virtual currency exchanges under the regulation of government bodies. For another instance, the Department of Homeland Security made successful efforts to freeze the account of Mt. Gox which was the largest bitcoin exchange. It was alleged that the account broke laws against money laundering.
Although the basic issue with the digital currency is related to the fact that one crash or breakdown of your computer can lead to a complete loss of your digital fortune, there’s something more horrifying than that. It comes with the knowledge of bitcoins getting more popular with time since that is directly linked to the government scrutiny that this currency is likely to attract.
Another important issue with this currency is linked to the fact that in order to get popular, this currency needs to come into use more commonly, which cannot happen until a lot of people start accepting it and making use of this more often. Although many traders have started accepting the digital currency, it still makes a handful of people when the entire population is taken into consideration. One cause of this could probably be the fact that not a lot of people are technologically adept around the world. As a matter of fact, a lot of people do not know about it yet, especially those who stay informed by word of mouth.
In order to become an important part of the common financial system, there are a few roles that cryptocurrency needs to play, for instance:
All in all, the hype that follows the emergence of cryptocurrency is, without a doubt, on its way to reignite the fire of the already heated debate. Therefore, in order to play the similar or near role that our fiat currency plays, cryptocurrency has to satisfy the above and many other important criteria. Although this doesn’t look even remotely possible at the moment, however, considering the speed at which technology is advancing, it could also replace the conventional fiat currency at a miraculous speed. In a nutshell, one could only forecast, but without surety, what cryptocurrency can end up in, a boom or a doom.
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