August 12, 2021
The Rise of Cryptocurrencies
Cryptocurrencies are an important and rising element in today’s digital economy. In this post, we shall be breaking down what this new form of digital currency is all about and why it remains an exciting currency to its users.
What are Cryptocurrencies?
In the simplest of terms, cryptocurrencies are a form of payment that can be exchanged online for goods and services. The word cryptocurrency is a blend of two words, “crypto” – data encryption and “currency” – a medium of exchange.
Millions of people around the world have adopted crypto as an investment and payment vehicle. Crypto will eventually help billions of people that do not have access to bank accounts start using digital currencies for transactions.
Why use Cryptocurrencies?
There are four key reasons why cryptocurrencies are being embraced around the world:
- Decentralisation – Crypto is not controlled by a central authority or government-owned bank. It is controlled solely by the owner. Over time, banks can devalue or inflate your money whereas in the case of crypto banks cannot do this. The same may not yet be said for speculator investors, however, so caution is advised.
- Usability – Crypto can be used and obtained anywhere in the world by anyone who wishes to use it.
- Immutability – cryptocurrency transactions, despite being public, promise you complete invisibility of data. This means your private details will not be revealed. Moreover, crypto transactions are immutable which means once processed there is no way to change the transaction.
- Quick and low cost transactions – Using Blockchain Technology, cryptocurrencies let you transfer money anywhere in the world within a few seconds. Compared with physical cash, the cost of actions is cheaper with cryptocurrencies.
What are the different types of Cryptocurrencies?
There are thousands of cryptocurrencies being circulated around the market today, each differing in terms of their value, use and type. Many of them are not popular and struggling to get their foot in the market, whereas the most popular cryptocurrencies account for more than 80% of the industry. These include:
Founded in 2009, Bitcoin was the original cryptocurrency and by far the most successful, with over $1trillion in market capitalisation this year alone. It is also valued more than Visa/Mastercard combined.
How has Bitcoin revalued?
Say you got into the game when a bitcoin was 10 cents, around October 2010. If you invested $100, you would have been able to buy about 1,000 bitcoins. At its all-time high, those 1,000 bitcoins would have been worth more than $48 million.
Why is Bitcoin so popular?
Because bitcoins are decentralised, there are minimal transaction fees or extra fees. The transaction process involved is easy and fast compared to other cryptocurrencies. Bitcoin is also the first of its kind to be peer-to-peer, meaning that two users from anywhere in the world could transfer bitcoin to each other, without the need for any intermediary bank or transfer.
The bitcoin market is also exceptionally volatile, meaning that investors can get a lot of gains as their price rises because they tend to sell them on. They can, of course, also make a lot of losses.
Ether (ETH) is the cryptocurrency used in the Ethereum network. It is the second-largest cryptocurrency on the market and Bitcoin’s biggest rival. Ethereum is the creation of programmer Vitalik Buterin, and it went live in 2015. It uses blockchain and is open source, but it is more sophisticated than Bitcoin in its design.
Many cryptocurrencies available on the market today run on the Ethereum network.
Dogecoin is a fun, new, and rapidly growing form of digital currency, originally started as a joke inspired by the popular “Doge” meme of 2013. After Bitcoin, numerous alternative cryptocurrencies to Bitcoin started popping up. Jackson Palmer (Founder of Dogecoin) jokingly tweeted that he is investing in Dogecoin, a fake meme-based coin to mock the crypto industry but everyone took it seriously and a strong community formed around it very soon after, which sparked its establishment.
What are the pros and cons of using Cryptocurrencies?
- Privacy and Security – Crypto users can expect transactions to be private and secure despite non-identifying transaction data being public.
- High Reward Investments – Since the cryptocurrency market is volatile, it can be a high reward (albeit high risk/high loss) investment.
- Accessibility – Through the process of mining (securing cryptocurrency transactions), anyone with access to a digital device and the internet can make money mining coins.
- Fraud risk reduction– Transactions are quick, permanent, and hard to fake, which eliminates a lot of the fraud issues banks deal with.
- Volatility – The cryptocurrency market is volatile. The value of coins can change wildly in a short amount of time. This means that some people have made a lot of money when a cryptocurrency like Bitcoin skyrocketed, whilst others have lost in equal measure when the price of a coin crashed.
- Security Breaches – As crypto is digital money, third party companies like digital wallets and exchange services need to ensure they utilise the highest possible security to avoid digital security breaches.
- Lack of coin protection – there is no way to recover coins if they are lost and there is no system in place to protect the value of your coin.
- A need for improved usability – as mainstream adoption of crypto is getting closer, more innovation is needed to increase usability.
What is the future for Cryptocurrencies?
- Centralised banks’ involvement in Crypto:
The currency exchange system, Ripple’s CEO, states that an uptake of digital coins by the world’s governments will only help the cause of independent cryptos. China, Cambodia, the Bahamas have launched digital currencies through their central banks in recent months. By doing this, it will heighten demand for more efficient cross-border transactions in the future.
The owner of a coffee shop in Shoreditch, London met a bitcoin enthusiast, who presented the benefits of the digital currency and convinced him to accept it as a payment method in his shop. This is proof that we are going to see crypto used for more everyday transactions.
Bequia, an island in the Caribbean, is set to become one of the most Bitcoin-integrated communities in the world. The island will be the first of its kind to accept bitcoin as payment for properties. Bitcoin will also be accepted as payment for everyday essentials like in their restaurant, cinema, and supermarket.
Cardstream is in no way intending to recommend the purchase or sale of cryptocurrency; nor judge, promote or detract from it. The comments herein are a brief glimpse of the phenomenon and readers must rely on their own judgement alone if using cryptocurrency.
Best advice: read and watch before jumping in, if you should consider doing so.