Cryptocurrency refers to a digital currency created and managed through application of encrypted techniques or cryptography. The introduction of the Bitcoin in 2009 opened an avenue for cryptocurrency trade and in 2013; it peaked to about $266 per bitcoin (Rosec). All transactions are done via network rendering it free from government interference. Currencies such as the Japanese Yen seems to be approaching the dominant US dollar revealing that cryptocurrecy is likely to surpass traditional currencies and replace it.
The coins are created digitally by use of computers in solving complex algorithms and crunch numbers. Unlike the fiat currency that is centralized and regulated by government cryptocurrency is not and the value depends on the amount investors are willing to trade it at any time. According to Bedford (59), the invention of Bitcoin was in 2008 by the programmer Nakamoto in a white paper who described it as the electronic cash. Block chains represent ledger systems, which facilitate cryptocurrency and promote legitimacy of the system that tracks every transaction from the buyer to the seller and vice versa (Peck 26). Cryptocurrency must satisfy divergent criteria to become part of the mainstream financial system thus may need complex mathematical formulae, which are also easy to understand by consumers (Bresett 3). Although it may be centralized, it should ensure user anonymity and be easy to tax. In the future, cryptocurrencies will be subjected to heavy regulation making by authorities to improve the credibility (Extance 21). The fact that some countries have banned cryptocurrency trade in their territories reveals that success of the trade is quite challenging. Some of the banned ones include ICOs and cryptocurrency, South Korea ICOs and anonymous trading, while Japan has started regulating digital currency exchanges.
Cryptocurrency will soon surpass and replace traditional currencies due to its current popularity. The market involves trading different digital-based coins and will soon replace national currencies in the future. Investing in trading the currency is similar to investments involving stocks and bonds (Bresett 1). Such trade experiences various cycles due to volatilities of the currency. Although it disrupts the banking industry people should consider it a better way of saving and investing their money. Investors are attracted to trading in cryptocurrencies since there is no intermediaries to oversight its exchange. The future of the cryptocurrency supply chain will determine commerce since it experiences less friction between buyers and suppliers. According to Rafferty, the price of Bitcoin reached a value of $10,000 on November 28 showing that the currency is becoming quite popular. Some big companies such as eBay, Expedia, Subway, and Microsoft are accepting Bitcoins and other digital currencies, which mean that in the future other companies will join in (Peck 27). The Swiss Government also, accepts Bitcoin for payment of taxes while Dubai has announced the desire to become the world’s first blockchain city (Osborne). Since these are major economies, it is clear that other nations including the United States will consider the digital currencies.
Digital currencies are becoming familiar to various companies in the world due to internet connection that facilitate exchanges. Some projects such as Skycoin have managed to give each company own blockchain and helped to combat high traffic and loading times without paying transaction fees cryptocurrency seems to grow exponentially and may be considered as the investment of the future (Schroeder). The establishment of various blockchains is a proof that digital currencies have a great and successful future. Several people seem interested in purchasing cryptocrrencies such as the Bitcoin thus this market is likely to go up, as many are promising to buy more. Since it is a global concept exchanges can be in any country thus control of the market may be unlikely for regulators and governments (Narayanan 3). Some financial institutions such as Falcon Bank intend to offer digital currency-linked bank accounts, which will enable many investors to have more trust in the trade.
On the other hand, the future of cryptocurrencies may face down fall leading to collapse due to increasing scrutiny. For instance, Bitcoins are decentralized and involve anonymity on transactions making it a favorable currency for illegal activities such as money laundering, drug peddling, as well as weapon procurement (Rafferty). Such issues have already attracted the government and other regulatory bodies such as the Financial Crimes Enforcement Network, the Homeland security (FinCEN), and the FBI among others. For instance, in 2013 FinCEN gave some rules to define virtual currency exchanges thus strict regulations may make it difficult to trade such currencies (FinCEN). Other coins include the Litecoin, Ripple, MintChip making the field quite competitive (Gandal and Halaburda 5). The future of such currencies is limited due to digital misfortunes such as a computer clash, which can erase somebody’s digital fortune. Hackers are also very alert in advancement of technology and pose great threat to cryptocurrecy. The people in the trade are few since the currency has not been widely accepted by consumers. However, due to their complicated nature compared to the conventional currencies many individuals are likely to reject cryptocurrency making it less popular (Seetharaman, Saravanan, Patwa and Mehta 230). Thus, digital currencies may not replace the traditional medium of exchange in the world.
In conclusion, cryptocurrency trade will grow due to the coming together of some investments such as Bitcoin and large banks in a way to run trials through and simulate a similar ledger system. Bitcoin’s block-chain technology treats the currency as a stock and profit thus resembles stock exchange trade. Since cryptocurrency ensures legitimacy and tracking of transactions both ways from sender to recipient, investors can have confidence in investing in digital currency and leap the benefits.
Works Cited
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Bresett, Mark. Bitcoin: What You Need to Know about the Cryptocurrency. Wadsworth Cengage Learning, 2017.
Extance, Andy. The Future of Cryptocurrencies: Bitcoin and Beyond. Nature, Vol. 526 Issue 7571, 10/1/2015, p21-23. 3p. 1 Illustration, 1 Diagram.
FinCEN. FinCEN Issues Guidance on Virtual Currencies and Regulatory Responsibilities. 2013. https://www.fincen.gov/news/news-releases/fincen-issues-guidance-virtual-currencies-and-regulatory-responsibilities
Gandal, Neil, and Hanna Halaburda. "Competition in the Cryptocurrency Market." (2014).
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Peck, Morgan E. Blockchains: How they Work and why they’ll Change the world. IEEE spectrum, vol. 54, no.10, Oct. 2017, p.26-35
Rafferty, John. “Litigating Cryptocurrency: Is Bitcoin's Future Doomed?” The Legal Intelligencer, 9 Jan. 2018, www.law.com/thelegalintelligencer/sites/thelegalintelligencer/2018/01/09/litigating-cryptocurrency-is-bitcoins-future-doomed/?slreturn.
Rosec, Ameer. Five Benefits of Cryptocurrency: A New Economy for the Future. 2016. https://decentralize.today/5-benefits-of-cryptocurrency-a-new-economy-for-the-future-925747434103
Schroeder, Jules. Millennials, Here's How Cryptocurrency Could Transform Your Future. 2018. https://www.forbes.com/sites/julesschroeder/2018/01/09/millennials-heres-how-cryptocurrency-could-transform-your-future/#4c2bb6719b35
Seetharaman, A., Saravanan, A.S., Patwa, N. and Mehta, J. “Impact of Bitcoin as a World Currency”. Accounting and Finance Research, vol. 6, no. 2, 2017, p. 230. doi:10.5430/afr.v6n2 p230.
