By Matt Casadona
The topic of cryptocurrency began sweeping the nation in recent years, even though there is still much to learn about this technology. There are various concerns about crypto like Bitcoin and its ability to disrupt our current financial system.
Cryptocurrency is a digital currency that’s created and managed with cryptography, an encryption technique. This currency first started with Bitcoin, but now there are many different types of crypto available.
The Future of Crypto
Crypto uses peer-to-peer technology to provide decentralized currency. It enables payments, transaction processing, and verification to be carried out by the network. Decentralization means crypto, like Bitcoin, is free from government manipulation and interference. The downside to this, however, is there is no absolute authority to ensure things go smoothly, and there’s no backing of the value of the coins.
The value of cryptocurrency depends on what investors are willing to pay for it. If an exchange folds, then those with balance will have no ability to get their assets back. Here’s what the future holds for cryptocurrency.
Capitalization of Crypto
While the future of bitcoin is a subject of many debates among investors, many expect the capitalization of crypto could boom within the next five years alone. However, crypto investments are volatile, which makes many seasoned investors wary of investing.
Another side of this is crypto is limited to transactions, which makes it susceptible to collapse. The verification process for crypto is less efficient than currency systems with a central authority, like a bank.
Cryptocurrency’s main benefits are decentralization and transaction anonymity. Because of this, it has become a currency of illegal activities that include drugs, smuggling weapons, and money laundering. Because of this, crypto has attracted the attention of regulatory and government agencies like the SEC, FBI, and Department of Homeland Security.
This scrutiny will continue so long as criminals use crypto as their preferred payment method.
The Rise of Alternatives
While Bitcoin was the first cryptocurrency, there are a ton of others gaining visibility every day. These include:
- Litecoin: Bitcoin’s rival, Litecoin, is designed to process small transactions quickly. It differs from Bitcoin because it doesn’t require heavy horsepower like Bitcoin’s mining. Instead, Litecoin’s can be mined by a regular desktop.
- Ripple: Launched by OpenCoin, Ripple is a currency and payment system that enables transferring funds in any ‘currency’ to another person on the network in just a few seconds.
- MintChip: MintChip is unlike many other cryptocurrencies because it was created by the Royal Canadian Mint, a government institution. This crypto is a smartcard that holds electronic value, which can be securely transferred from one chip to another. Unlike bitcoin and many other cryptos, MintChip is backed by the Canadian dollar, a physical currency.
As crypto continues to be a hot topic, we can expect to see more alternatives and potentially safer alternatives for new investors.
Cryptocurrencies currently have limitations. For example, someone’s assets can be erased if a computer crashes, and exchanges are often places that hackers can target. As crypto becomes increasingly popular, it’s expected some of these issues may be overcome with technological advancements.
Merchants Accepting Cryptocurrency
More merchants have started accepting cryptocurrency as it continues to be a hot topic around the world. However, these merchants are still very much in the adolescence stage. Many merchants don’t accept crypto as payment, so don’t expect to purchase things on Amazon with crypto any time soon.
For cryptos to become more widely used among merchants, they will need to become more widely used among consumers. Because of their complexity compared to something like a debit card, most people will avoid crypto at all costs.
Will Crypto Become Mainstream?
For crypto to become a part of the financial system, criteria will need to be met. It would have to be complex enough to avoid fraud and cyber-attacks but easy enough for consumers to understand and use daily like they do cash and credit cards.
It would also have to be decentralized, which was one of its main benefits for many users. It would also need to have consumer safeguards and protection, just like a credit or debit card.
Finally, for crypto to enter the mainstream financial system, it would have to preserve its users’ anonymity (another one of its most significant benefits to current users) without being a place for tax evasion, money laundering, or other criminal activity.
These will be demanding criteria to satisfy because it goes against the entire reason crypto was invented. With this in mind, don’t expect to see crypto in our financial system any time soon.
One day it may be possible for crypto to enter our financial system if it becomes a hybrid between what it currently is and a regulated fiat currency. However, the chances of that happening are slim.
As crypto gains momentum, there will be more investment opportunities for both seasoned professionals and newcomers. When considering investing in cryptocurrency, remember you risk losing your investment because it has no intrinsic value other than what a buyer will pay for. Bitcoin can take a plunge in a single day. With this type of volatility, many seasoned investors still choose to stay away from crypto investments.
Final Thoughts on Crypto’s Future
With consumers unable to figure out what crypto is and how it would benefit their everyday lives, and investors wary of investing in it, we’re unsure what the future truly holds for cryptocurrency. Bitcoin has always been an important topic of debate, but they are the best example of crypto. When deciding whether or not investing in crypto is right for you, take a look at those who have had success and failure investing in Bitcoin.
We don’t expect a cryptocurrency to go away any time soon, but we can expect some new alternatives to come out in the future that makes understanding crypto easier for consumers; it may be easy enough to become part of the US financial system.
Matt Casadona holds a bachelor’s degree in business administration with a marketing specialisation and a psychology minor. Matt is enthusiastic about marketing and business strategy and likes living in San Diego, travelling, and listening to music.
Disclaimer: The opinions expressed in this article are those of the author and do not reflect the opinions of TECHx or its Editors.