Cryptocurrency is currently a growing ecosystem, and the number of people registering for them has increased at an exponential rate. With bitcoins becoming the talk of the masses, it is estimated that this domain is increasing at a rate of almost 60 per cent each year. Private and public sector industries have also started to accept it as a form of payment. Bitcoin is now not the only monopolist in the current scenario. Companies such as Ripple, Stellar, and Ethereum have also entered the competition.
The impact can be estimated by just the amount of capital that is currently being generated by this industry. Presently, the cryptographic business is a 200 billion dollar industry. Although this trend gained popularity quite recently, the technology is not very new. The roots trace back to the 80s with multiple advancement iterations finally leading to the current revolution. Lapses in our current security and financial system have revealed the true need for this technology.
Around 11 years ago, the first Bitcoin was officially mined. The lucky man was Satoshi Nakamoto. It was mined on a decentralized network. Litecoin was launched officially in 2011. Seeing the fast-paced growth and a colossal potential, Ripple joined the scene in 2012. Bitcoin, however, gained popularity in 2013 and the price reached a whopping 1000 dollars. Ethereum launched the concept of contract in 2015.
The hike in price was not short-lived. Two years later, in 2017, the price of one bitcoin reached a staggering 10,000 dollars. Within a few months, the price became twice and swelled to 20,000 dollars during 2017. A decentralized system was offered by EOS based upon blockchain. Currently, more than 5000 currencies have been listed in the market. Crypto is an investment in the decentralized finance system. Based on the blockchain, the transactions are publically available, enabling higher transparency across the financial system. With digital currency now the talk of the town, we list down a few of the major advantages.
1. No need for third party
Due to the deployment of blockchain, there is no need to hire a trusted third-party for these transactions. Currently, in the financial systems, there is always a need to hire an external party for counterfeit and fraud detection and prevention. Limited companies provide such service and that means they really take a lot of money. With blockchain, however, the entire system is decentralized and as clear as glass. All the nodes have the entire transaction history which can not be altered. The entire supply chain can also be tracked. It is also safe from hackers because even if a hacker were able to infiltrate one node, it would take more than ever to compromise the other nodes. This would be next to impossible to hack all of them and piece together the information to make sense out of it. This eliminates the need for third-party service providers.
2. Scarcity and value
Since the total number of coins is limited, the scarcity directly impacts the value of these currencies. There a limited number of coins in the system. This makes them run according to the basic economic principle of supply and demand. The higher the demand for these coins, the higher the prices and bids go. In 2017, the demand swelled to their peak. The currency was extremely high in demand. Many people who invested even small amounts instantly made a fortune. However, this makes this currency volatile and high-risk. It always depends upon the market trends and whether people are interested in them or not. According to some, the risk is totally worth it while those who lose a fortune campaign against it.
The technology behind crypto allows a person to remain anonymous. The actual owner is always hidden from the public. Despite the transaction’s transparency and traceability, the original user remains anonymous. Everyone is identified as a node, and all the communication and peer-to-peer sharing take place between the nodes. Even if someone is involved in fraudulent activities, the node gets a block from the network. This is a major problem in the current financial system. Mostly all the information of users is stored on a database on a server. If a hacker can compromise the server, all the information is lost. There have been major leaks in the past. Cryptography, although it is trying its best to prevent unauthorized access, there are always some loopholes to fill. Cryptocurrency is free of such volatility and cyber threat.
4. Entrance into the financial system
Cryptocurrencies like Bitcoin etc enable people to enter the financial system regardless of the fact that they have an access to a bank or not. Many people who want to get a loan in case of an emergency have to wait for quite a long time and pass through a lot of authorization and interrogation. Even entrance into a financial system such as opening a bank account takes quite a lot of time. In addition to this, the taxes are absolutely harrowing. With cryptocurrency, there are no such shackles. There are no entry caveats and no exit problems. It also saves us from the long queues in banks.
5. No Central Authority
DApps allow people to develop applications without having to rely on a central authority. Some of the popular DAps are Tezos, Ethereum, etc. This decentralization is what makes it so unique. No one is able to maintain a monopoly over the industry. The security and safety of this platform also due to de-centralization. Since there are so many nodes and processes, no one is able to completely hack the system. Even with one infiltration, it would be of no use unless other nodes are hacked simultaneously. With a single server or a central authority, a single compromise would mean disaster. There would be an entire loss of information with little to no return of information or privacy. This makes it clear that there must be no central authority if safety and security is the prime target which in all cases is.
The main investors in the field of digital currency are Crypto Hedge Funds and the Harvard Endowment Fund. The most popular cryptographic exchanges are Coinbase and Bitstamp, whereas Global Digital Finance and Crypto valley Association are the primary participants in this field.
This new system has eased the lives of around 1.7 billion users across the globe by providing them with anonymized transactions with the protection of the user data. This has completely eliminated the manual labor and administrative work creating smart contracts.
Most people across the globe do not have access to basic banking services to fulfill their financial needs. On top of being financially disadvantaged, finding alternatives is quite risky and doubtful. This leads to more instability among the people who have applied for a loan. Cryptocurrencies have high volatility and accessibility allowing them to bring together a large audience.
In order to cope with the cryptocurrency hype, banks and institutions now have the policy to decide how they will deal with customers, investors, and the internal voices advocating in favor of blockchain assets. In 2017, the cryptocurrency industry saw its zenith. The current financial institutions and the industry has the most to lose in case of the rise of the digital currency.
Despite all the advantages we have discussed, many companies and people consider this as a scam. The financial institutions of the present times need to reconsider cryptocurrencies. Roughly one-third of CFOs say that they do not know enough about the cryptocurrency to have an opinion while around 30 percent consider it to be a fraud. Only a mere 14 percent of the people believed it to be real and believe will increase in value.