As the buzz around cryptocurrencies grows, more and more people are asking – What exactly is cryptocurrency? How does it work? Is it legal tender? Who started it all?
Cryptocurrency is a digital representation of value that can be used as a medium of exchange, store of value, or unit of account. It can be sent and received electronically from one person to another using software known as a wallet. Cryptocurrencies exist only as computer code and aren’t controlled by any central bank or monetary authority.
That means transactions are nearly instant, anonymous (unless you tell someone your wallet address), and cannot be counterfeited or reversed arbitrarily by the sender. Now that we understand what cryptocurrency is, let’s take a look at why more countries are starting to embrace it.
The cryptocurrency market is attracting new investors at an unprecedented rate
An increasing number of countries are starting to see cryptocurrencies more positively. You may have read about how Bitcoin’s popularity has been rising for months. Or maybe you’ve heard about how enthusiastic South Korea was when deciding to officially legalize it. It can be hard to understand all the hype surrounding cryptocurrencies, but it’s worth looking at them for their potential as an investment tool and even a way of life.
Leading economists see cryptocurrency markets as increasingly stable, arguing that their decentralized nature makes them resistant to government regulation or market manipulation by large corporations. Cryptocurrency prices are still volatile. The cryptocurrency value against fiat or regular currency is almost always fluctuating. However, these digital tokens have shown themselves that they can withstand sell-offs and surges better than more traditional forms of currency.
While no one knows what the future holds for these currencies just yet, they continue to gain popularity in many regions around the world and could be a major part of our global financial system within several decades.
Cryptocurrency exchanges are seeing higher volumes than ever before
Cryptocurrency is still very complicated and volatile to all. Yet, more countries are accepting that there is value in it and increased trading activity at cryptocurrency exchanges.
Cryptocurrency exchanges are seeing higher volumes than ever before. Every month, people from new countries create crypto-wallets to buy their first coins with U.S. dollars (USD) or even their local currency. The volatility of Bitcoin’s price has fueled its popularity over time, as more people realize that it might be worth something one day. So, they’ve started buying in; right now. Investors who have been holding since 2013 can only sit back and watch their wealth go up as time goes by.
More large corporations are looking to stake their claim in cryptocurrency markets
As more and more people enter the crypto space, major corporations are slowly starting to embrace it for themselves. While some of these examples are different from developing their cryptocurrencies, they still show that large companies understand the need for blockchain technology and its potential future uses.
Facebook regularly updates its services, but this one almost seems out of character. It created its cryptocurrency, dubbed GlobalCoin. The announcement was notable because it signals a trend in which social media/tech giants are looking for ways to embed themselves into the world of blockchain technology. It’s helpful that Facebook already has a significant number of users, and their money-making them prime candidates for an ICO offering right off the bat.
Countries continue to show interest in creating their cryptocurrencies.
Believe it or not, Bitcoin is not the only cryptocurrency out there. We have seen several countries embrace cryptocurrencies over the past couple of years. Some are even creating their virtual currencies—colloquially known as crypto-currencies as an alternative to standard currencies.
The interest in cryptocurrencies is driven by many factors. These include:
- The secure blockchain technology used to run them
- The need for a currency that is both decentralized and international
- The anonymity that they provide
Cryptocurrencies have steadily grown in value for the past few years
Despite the naysaying, cryptocurrencies have not gone away and continue to grow in popularity and value. The amount of people investing in crypto has increased over time, with approximately 9 million wallets being traded in the past year alone. That means that cryptocurrency has a strong chance of staying relevant for years to come.
Although more regulation will likely follow as time goes on and crypto becomes more mainstream, it’s worth noting that this technology is still very young, and there are still plenty of opportunities to be seized before we’re forced to play by an entirely new set of rules.
Bitcoin may have taken a hit when China placed stricter regulations on its citizens’ cryptocurrency trade earlier in 2017, but there were other major events leading up to it. From Europe’s acceptance (and subsequent rejection) of Bitcoin and other cryptocurrencies as forms of payment at physical locations to Russia’s interest in creating its digital currency (the CryptoRuble), plenty was happening even before China stepped into the picture.
There’s no better indicator than these countries’ shifting attitudes toward cryptocurrency that it will only continue to grow over time, even if some centralized organizations want us to stop using it for monetary transactions.
Crypto is not going away anytime soon.
Are you confused about cryptocurrencies? Maybe your parents or friends keep telling you to invest in Bitcoin, but you don’t know how. Is there a difference between cryptocurrency and virtual money? Do I need to put my money in cryptocurrency for it to be ‘real’ or valuable?
What the heck is going on?!
Cryptocurrencies are confusing, no doubt about that. It’s not surprising—cryptocurrency was created years ago as a way to bypass banks and payment platforms like PayPal, but they’ve never been connected to any country, making them what’s known as “decentralized.” Decentralized means that they aren’t controlled by anyone—the currency lives online and doesn’t belong to any government.
The defining characteristic of cryptocurrencies is their security—they’re encrypted by super-complicated mathematical equations that make it very hard for hackers and scammers to break in. But because no one owns them, there isn’t anyone responsible if something goes wrong. Some notorious things have gone wrong with cryptocurrencies: when the value of Bitcoin dropped from $1,100 US dollars per coin down to $450 US dollars per coin in 2013 (a 50% drop). People who bought thousands of dollars worth saw the sudden loss of half their investment overnight.
In another infamous case from 2014, an early investor named Charlie Shrem got locked up for two years for helping other people buy drugs with Bitcoin on the dark web.
Don’t let your friends get caught up in shady situations like these! The appeal of cryptocurrencies is understandable – they’re largely unregulated and decentralized, which gives them certain freedom unlike traditional currencies – but countries and their economic leaders should be careful before entering this new world without knowing where it leads them.