Cryptocurrency is all the rage today. Bitcoin, just the other day, rose to nearly $20,000 but has fallen to nearly half the value. Governments the world over are mulling restrictions on cryptocurrency trading.
How bad is it?
The World of Cryptocurrency
Here is the thing with cryptocurrency – it’s not just about ‘bitcoins’.
It’s just one of the cryptocurrencies that are based on the blockchain technology – an ultra-safe and decentralized way to store and transmit data.
The Blockchain is a record of a string of files and data that keeps growing constantly. It’s difficult to hack through, unlike other modern technologies, simply because the information is distributed to multiple network systems together in real time.
To be able to change the ‘data’, a hacker has to change the information from all the devices in the network, which requires a huge computational power.
As a result, the data saved over blockchain is nearly tamper-proof, and if a change is seen on one device, the other devices can send an alert of a possible hacking attempt.
Cryptocurrencies and Blockchain
Most of the major cryptocurrencies today use the Blockchain technology. It’s only a handful out there that do not – like the IOTA, which is using the Tangle technology as a ledger.
The focus for any cryptocurrency is to have a decentralized way of transmitting data, and some are using technologies other than Blockchain for doing that.
Why are Cryptocurrencies So Highly Valued?
Most people would kill for a Bitcoin or two. There are a lot of different ways to earn Crypto – and some even today look towards mining.
Mining for Cryptocurrency such as Bitcoins is perhaps still a great way to get a lot of Crypto for yourself, but it requires a lot of money, time and patience. Additionally, when it comes to Bitcoins, over 80% of the available amount has already been mined.
Another option would be to go into marketing. With the number of new Cryptocurrencies and related marketplaces cropping up, the demand for marketing it is quite high.
The problem with cryptocurrencies is that governments do not know who has access to it all. That was the whole point of it all in the first place, to ensure that the system remains outside government influence, but it has thrown up different challenges:
- Governments do not like people using a currency that is outside of their ambit of control
- Terrorism activities and illegal money laundering becomes easier due to the anonymity of it all
- The acceptance of cryptocurrencies is still an issue. Can you make your local coffee shop accept your Bitcoin?
The Uncertainty of It All
The primary problem remains that cryptocurrencies, even today, is not validated by most governments.
On the other hand, the usefulness of blockchain technology means that companies could use it to transfer funds easily – exactly why Ripple is gaining momentum. Ripple, the only cryptocurrency, which is owned 75% by its parent company Ripple Inc. has struck deals with financial organizations like MoneyGram and other Japanese banks, who are looking to leverage in on its secureness.
More, some governments like Australia and others are planning to launch their own cryptocurrencies.
With the many cryptocurrencies in the market, from Bitcoins, Monero, Litecoin, Ethereum, to Ripple, the only question for you would be to know what will work in the long run and what won’t.
Cryptocurrencies are here to stay but just like the stock market, not all of them would give good returns.