Blockchain, side chains, digging – the terminology in the secret world of cryptocurrency continues to accumulate in minutes. Although it sounds unreasonable to introduce new financial terms into the already complex world of finance, cryptocurrencies offer a much-needed solution to one of the biggest problems in today’s money market – the security of transactions in the digital world. Cryptocurrency is a defining and destructive innovation in the rapidly evolving world of fine technology, an appropriate response to the need for a secure exchange environment in the days of virtual transactions. At a time when transactions are just numbers and numbers, cryptocurrency offers to do just that!
In its most basic form, cryptocurrency is evidence of an alternative virtual currency concept that promises secure, anonymous transactions over a peer-to-peer online network. The wrong name is property rather than actual currency. Unlike everyday money, cryptocurrency models work without a central authority, as a decentralized digital mechanism. In a distributed cryptocurrency mechanism, money is issued, managed and approved by the collective network of community partners – whose ongoing activities are known as mine on a partner’s machine. Successful miners also receive coins to evaluate the time and resources used. Once used, transaction information is broadcast to a blockchain on the public key network, preventing each coin from being used twice by the same user. The blockchain can be considered as a cashier. The coins are protected behind a password-protected digital wallet representing the user.
The provision of coins in the world of digital currencies has been decided in advance, without manipulation, by anyone, organizations, government organizations and financial institutions. The cryptocurrency system is known for its speed, as transaction activities through digital wallets can materialize funds in minutes, compared to the traditional banking system. In addition, it is largely irreversible in design, further reinforcing the idea of anonymity and eliminating any additional chances of tracing the money back to its original owner. Unfortunately, key features – speed, security and anonymity – have also made cryptocurrencies a way to transaction for many illegal transactions.
Just like the real world money market, exchange rates fluctuate in the digital coin ecosystem. Due to the limited number of coins, when the demand for currency increases, the value of coins inflates. Bitcoin is the largest and most successful cryptocurrency to date, with a market capitalization of $ 15.3 billion, occupying 37.6% of the market and currently priced at $ 8,997.31. Bitcoin appeared on the foreign exchange market in December 2017, trading at $ 19,783.21 per coin, before facing a sudden decline in 2018. The decline is due in part to the rise of alternative digital coins such as Ethereum, NPCcoin, Ripple, EOS, Litecoin and MintChip.
Due to hard-coded supply constraints, cryptocurrencies are considered to follow the same economic principles as gold – the price is determined by limited supply and fluctuations in demand. With constant exchange rate fluctuations, their resilience remains to be seen. Therefore, investing in virtual currencies is currently speculation rather than an everyday money market.
After the Industrial Revolution, this digital currency has been an indispensable part of technological breakdowns. From the point of view of a casual observer, this rise can seem exciting, threatening and mysterious at the same time. While some economists remain skeptical, others see it as a lightning revolution in the monetary industry. Conservatively, digital coins will displace approximately a quarter of national currencies in developed countries by 2030. This has already created a new asset class alongside the traditional global economy and a new set of investment instruments will come from cryptocurrency in the coming years. Recently, bitcoin may fall to shed light on other cryptocurrencies. But this is not a signal of the collapse of the cryptocurrency itself. While some financial advisers emphasize the role of governments in breaking the secret world to regulate the central government mechanism, others insist on continuing the current free flow. The more popular cryptocurrencies are, the more control and regulation they attract – a common paradox that discourages the digital note and undermines the main purpose of its existence. In any case, the lack of intermediaries and supervision makes it extremely attractive to investors and makes daily trading change dramatically. Even the International Monetary Fund (IMF) fears that cryptocurrencies will displace central banks and international banking in the near future. After 2030, regular trading will be dominated by the cryptocurrency supply chain, which will offer less friction and greater economic value between technologically savvy buyers and sellers.
If cryptocurrency seeks to become an essential part of the existing financial system, it will have to meet many different financial, regulatory and societal criteria. It will need to be protected from hackers, user-friendly and highly protected in order to offer its main benefit to the core monetary system. It must maintain the anonymity of consumers, without being a channel for money laundering, tax evasion and internet fraud. As these are mandatory for the digital system, it will take several more years to see if the cryptocurrency will be able to compete with the real world currency in its heyday. Although this is likely to happen, the success (or lack thereof) of the cryptocurrency in tackling the challenges will determine the fate of the monetary system in the coming days.