BITCOIN

WHAT FUTURE OF CRYPTO LOOKS LIKE

Authored by:

Paavni Agarwal & Priya, Content Writers

Introduction:

People's working habits, communication styles, shopping habits, and even how they pay for things have all altered as a result of technological advancements. Companies and customers are less likely to use cash these days, and this trend is giving way to contactless payments. Now, a new type of payment method is gaining popularity i.e., cryptocurrencies. By now, almost everyone has heard of Bitcoin. It was the first cryptocurrency to gain widespread acceptance, but others are gaining traction. There are almost 2,000 distinct types of cryptocurrencies, and new ones are being created every day.

Cryptocurrency is a digital payment mechanism that does not rely on banks for transaction verification. It's a peer-to-peer system that allows anybody to make and receive money from anywhere. Cryptocurrency payments are digital inputs to an online database that specify particular transactions, rather than actual money that is carried around and traded in the real world.

The name cryptocurrency comes from the fact that it utilizes encryption to authenticate transactions. This implies that storing and transferring bitcoin data between wallets and public ledgers requires sophisticated code. Encryption's goal is to ensure security and safety.

Blockchain technology is commonly used to create cryptocurrencies. The method transactions are recorded in "blocks" and time-stamped is described by blockchain. It's a lengthy, complicated procedure, but the lt is a secure digital ledger of bitcoin transactions that hackers can't alter.

One should make sure to do an investigation, read reviews, and speak with more experienced investors before investing in cryptocurrencies. Another crucial step is to diversify one’s investments. There are dozens of alternatives, and it's better to diversify your portfolio by investing in many currencies. Furthermore, while purchasing cryptocurrency, it must be secured. Before investing in storage, like with exchanges, one should research their options.

The economic impact of cryptocurrency:

Since the inception of Bitcoin in 2009, the economic impact of cryptocurrency has been both overt and subtle. Now in its eleventh year of existence, the digital or virtual money that takes the form of tokens or coins has established itself as a viable currency and form of investment, and the economic impact of cryptocurrency is evident in national and global communities.

As of January 2020, more than 2,000 cryptocurrencies exist and nearly 36.5 million people living in the U.S. own some form of cryptocurrency. Although cryptocurrency as a whole hasn’t impacted larger sections of the economy like the stock market, 2017 saw hundreds of billions of dollars flow into cryptocurrency, further establishing it as a viable stock to invest in. Experts consider cryptocurrency to be “digital gold” because, like precious metals, it retains value without the risk of depreciation.

Still, a youthful currency, the economic impact of cryptocurrency is expected to continue to be a relevant discussion amongst economists and investors alike. Here are some of the ways the economic impact of cryptocurrency has manifested.

Bitcoin:

Bitcoin is the world's most common and well-known cryptocurrency. It has the same basic structure as it did when created in 2008, but repeat instances of the world market-changing have created a new demand for cryptocurrencies much greater than its initial showing. By using a cryptocurrency, users can exchange value digitally without third-party oversight. All bitcoin transactions are verified by a massive amount of computing power. Bitcoin is not issued or backed by any banks or governments, nor is individual bitcoins valuable as a commodity. Despite it not being legal tender in most parts of the world, bitcoin is very popular and has triggered the launch of hundreds of other cryptocurrencies, collectively referred to as altcoins. Bitcoin is commonly abbreviated as "BTC."

Strengths:

Bitcoin has strength by design to make it a viable currency that has elevated it in status over the years, more notably the fixed limit of bitcoin that will exist. Bitcoin will be mined with diminishing returns every four years until the maximum number of bitcoins is reached: a total of 21 million. This aspect is important for its value. Due to the limited amount of bitcoins, it will never become inflated from an overabundance. Also, bitcoin and other cryptocurrencies are generally regarded as being protected from inflation originating from national government changes or restrictions. This creates a “for investors to put their health too, as it generally does not lose value based on inflation. Bitcoin has the largest user base and longest history of any cryptocurrency, with rising users since 2009 resulting in a current estimate of more than 100 million users globally.

The increasing adoption rate of Bitcoin points to room for growth, with a historic 220% increase in the number of owners year over year.

Weaknesses:

Bitcoin has quite a few internal weaknesses that are part of its design and cannot easily be modified.

  • The public ledger or blockchain means that every user can see every transaction. There is semi-anonymity, in that the owners of bitcoin wallets cannot be identified outright, but it's slightly nerve-wracking for some potential adopters. The public blockchains are shared with all users, which means that it is susceptible to attacks due to easy access.

  • So far, the Bitcoin network has been subjected to multiple “stress tests” that were essentially DDoS attacks. These tests were launched by exchanges and miners to attempt to prove a point about Bitcoin design: that the network can not handle high load transaction rates.

  • Bitcoin has developed a questionable reputation through recent events. Stories like Silk Road can portray a negative image of digital currency in general, not just Bitcoin. It also developed a reputation of having questionable security. Mt Gox, short for Magic the Gathering Online Exchange, was the world‟s primary bitcoin exchange until it went bankrupt after it was robbed by hackers in 2011 of approximately 460 million USD

  • The high energy usage required by Bitcoin mining and the potential environmental effects is easy criticisms of the project often levied by detractors.


Opportunities:

Cryptocurrency is in a unique position as a forerunner in a possibly transformative technology to long-standing financial systems. By its very nature, it can fill gaps in current financial technologies and be able to help solve traditional banking problems through peer-to-peer systems.

Due to bitcoin's ad-hoc networking capability, two users can trade bitcoin with each other by scanning QR codes displayed on their phones printed out by the application. This is a truly unique solution to a problem that has existed for years for some people. This would invariably increase as the user base grows, so the demand for cryptocurrency networks and applications will come to the forefront. There is an enormous market for potential developers to create these applications, as this technology could affect any industry that relies on a trusted third-party clearing system

One of Bitcoins' largest opportunities is that it can also act as a sort of commodity, similar to gold. The value of gold can spike considerably whenever an event threatens the balance of the global market, as we have seen with the Brexit vote. The precious metal saw an increase in value to a two-year high as investors became uncertain as to how the markets would react to the vote, using it as a haven.

Threats:

Bitcoin has quite a few hurdles to clear for user acceptance to become widespread.

The value fluctuations that plague cryptocurrencies put doubt in users, as well as investors. Ultimately a limiting factor in cryptocurrency is general acceptance. Value fluctuations reduce the trust that a consumer's value would be retained on a day-to-day basis, limiting faith in the currency's overall worth. In a survey performed by PwC, 83% of those surveyed had little to no familiarity with bitcoin

The lack of central ownership of cryptocurrencies means that any attempt to remediate this marketing problem using advertisements could theoretically help the investing company's competition. This is not an ideal situation for a marketing plan.

Cryptocurrencies have also seen fraud and theft, generally due to faulty system setups by exchange companies. These hacks generally make the news, and can easily convince the layman that they are unsafe locations to put their money. There is also a large gap in laws that cover the use of cryptocurrency. As long as cryptocurrencies remain in an area not generally covered by the user, acceptance will be limited. Ultimately, all of these factors limit consumers ‟s trust in bitcoin and cryptocurrency.


Future:

The Bitcoin community is striving to push into the mainstream through innovation and solving old problems. Other forms of cryptocurrency have already emerged and have gained followings of their own, and each slightly different from Bitcoin and arguably as valuations like Iceland have cryptocurrencies, in turn,n may hold currency as a major currency solution, and Bitcoin will be instrumental in paving the way for currencies to flourish. The ability for cryptocurrency to perform microtransactions may allow it to bridge e-sponsored currencies that would not be able to solve but requires a much deeper market and economic analysis to determine. Also, the blockchain technology that acts as Bitcoin's backbone has potential uses in other ways, such as smart contracts These contracts are programmed payments that occur when a set condition occurs. This frontier is still fairly new and unexplored, mainly populated by different types of media. Other forms of digital property may become as popular as music and cryptocurrency. Eight years ago, digital money was completely unheard of, and the creator of Bitcoin single-handedly changed that.

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