What is cryptocurrency? Is future safe for cryptocurrencies?

Cryptocurrency has become a global phenomenom in recent years, although much is still to be learned about this evolving technology. There are many concerns and worries swirling around the technology and its capacity to disrupt traditional financial systems.

What is cryptocurrency?

cryptocurrencycrypto-currencycrypto, or coin is a digital currency designed to work as a medium of exchange through a computer network using blockchain technology that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.

Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. Cryptocurrencies typically use decentralized control as opposed to a central bank digital currency (CBDC). When a crypto-currency is minted or created prior to issuance or issued by a single issuer, it is generally considered centralized. When implemented with decentralized control, each crypto-currency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.[11] Traditional asset classes like currencies, commodities, and stocks, as well as macroeconomic factors, have modest exposures to cryptocurrency returns.

source: Wikipedia

Read also: Blockchain Technology

What is the Future of cryptocurrencies?

The future of crypto-currency is intimately connected to its considerable social and political impact. Cryptocurrency has the potential to benefit everyone – from the individual citizen to the nation-state. For both, there is increased opportunity for financial inclusion, ownership, and power, at lower cost, increased confidentiality, and better access to a global marketplace. Even seasoned investors are astonished at the potential for return-on-investment.

Further, at the political level, investing in blockchain offers an increased capacity for electronic government and digital society, with the potential to strengthen democracy, human rights, the rule of law, and anti-corruption initiatives. Witness Estonia’s E-residency system, which offers numerous digital benefits that most authoritarian governments would never dream of giving their citizens.

However, it is precisely the incredible potential for economic and political transformation that may slow the evolution and adoption of crypto-currency. In any system, players who start to lose out on previous benefits will consider defensive countermeasures. China is digitizing its own currency, the yuan, but is cracking down on decentralized cryptocurrencies like bitcoin. Russia is trying to chip away at its dependency on the US Dollar, but is equally nervous about cryptocurrencies; thus, Moscow is buying record amounts of gold. In the West, there is growing concern over cryptocurrency’s large carbon footprint. Remember that governments control your access to the Internet, so they also control your access to cryptocurrency. Here, consider the extent to which cryptocurrency may become associated with criminal, terrorist, or rogue nation use.

At the individual level, the potential risks of owning cryptocurrency include a steep learning curve, and rapid technological evolution. Standards, regulations, insurance, and norms are nascent, so there is a real risk that you will lose all of your money. Cryptocurrency infrastructure has been vulnerable, with numerous hacked exchanges. And cybersecurity concerns are also cryptocurrency concerns, from lost hardware and passwords to hacking, malware, phishing, extortion, and cryptojacking.

In the near term, the prospects for cryptocurrency are limited, simply because it is so new, and there is still much work to do on technical, security, policy, and legal fronts. Consider only the aspect of time: Visa can process over 50k transactions per second, whereas bitcoin can process less than 10, however there are many new currencies that can perform more transaction per second than Visa, eg-Matic.

Over the horizon, however, the power of cryptocurrency and blockchain retain the potential to transform not only world finance, but world politics. The FinTech space is so hot because coders, Internet users, digital revolutionaries, and entrepreneurs continually find space to improve the way that humans do things. In the end, money is a societal norm, and once the public gets comfortable with cryptocurrency’s usability, functionality, and security, adoption will follow. But that may take some time, and it may require significant patience on the part of the average investor.

In the meantime, it is wise to presume that cryptocurrency is a high-risk investment. You should even think of it as a binary investment: while a cryptocurrency such as bitcoin may become the most valuable asset in human history, its value may also – for some reason that may be hard to predict, given the large number of variables involved – drop to zero. At the moment, it is impossible to know. What we do know is that billionaires like Elon Musk can afford to lose all of their bitcoins, because they represent a small fraction of their wealth. Make sure the same rule applies to you.

source: CSA

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