What comes to mind when you hear the word “cryptocurrency”? At first glance, the term can appear to be somewhat confusing and maybe even intimidating to anyone outside of the financial technology and investment worlds. However, cryptocurrency is made for everyday individuals, not just finance and tech aficionados, and is an entity that is opening the doors to a new future for the global financial market.
Cryptocurrency is essentially a digital form of money, with no physical representation, that is created from code and recorded on blockchain technology. Cryptocurrency may be used for in-person or online transactions and are often conducted through mobile payment from a digital wallet.
While cryptocurrency is still in the early stages of reaching mainstream acceptance, there are many successful and high-profile merchants leading the way and demonstrating the viability of using cryptocurrency for everyday purchases and transactions. Dell, Microsoft, Overstock.com, Tesla, Virgin and NewEgg are just a few of the retailers paving the road and lending credibility to the promising future of cryptocurrency and digital payments.
Arguable, the most well-known form of cryptocurrency is Bitcoin (BTC), which found its beginnings as a digital currency and payment system in 2009. Since then, more than a thousand other tokens have been created in its wake. Altcoin, short for “alternative to Bitcoin”, is used to describe any cryptocurrency that is not Bitcoin. Many popular altcoins use the same fundamental building blocks as Bitcoin, but feature different monetary policies to encourage different uses. Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Ripple (XRP), Ethereum Classic (ETC), Bitcoin Cash (BCH), DASH, Dogecoin (DOGE), Nano (XRB), Tronix (TRX), NEO, Monero (XMR) and Digix DAO (DGD) are all examples of popular altcoins.
Bitcoin protocol enables peer-to-peer (P2P) exchange of currency – similar to how Paypal and Venmo work – but on a platform that is not associated with any financial institution or government. This means that you can transfer funds directly to a person or business instead of having to depend on a third-party like a bank or credit card company, which all charge fees and have regulations around who can do business with them.
Bitcoin creator, Satoshi Nakamoto, was motivated by the belief that society needed to move away from a traditional trust-based transaction model to one based off of “cryptographic proof”. As such, all digital currency transactions are recorded on a public electronic ledger, which cannot be altered, changed or reversed once the transaction is complete. This ledger is commonly referred to as the blockchain and with the permanence of data entered into the chain users are shielded from instances of fraud and data is protected from being tampered with or manipulated. By taking transactions out of the hands of human-run institutions, P2P digital currency trade networks offer consumers more freedom and control over their assets and provides a much needed service for the more than 50 percent of people on earth that currently have no access to the global financial market.
Due to recent spikes in the value of Bitcoin there has been a surge in the number of people wanting to invest in crypto and blockchain technology. Many investment vehicles have been created to meet this uptick in consumer demand, but not all have been met with praise.
Traditional financial advisors and investors are meeting the hype with skepticism, citing the market’s volatility as a major point of concern. Much of the market’s value has been built off of speculation and hype, often leading to many comparisons to the infamous dotcom boom.
Despite the risks, investors are flocking to new opportunities including initial coin offerings (ICO) where new coin developers sell their digital tokens in exchange for capital. Unlike a traditional Initial Public Offerings (IPO), most ICOs do not give investors a stake in the company; instead they operate more like crowdfunding campaigns. Accordingly, ICO curators claim that their activities fall beyond the Security Exchange Committee (SEC) oversight. ICOs generated more than $5.6 billion in 2017 and attracted companies of all sizes including large, multinational companies like Eastman Kodak Co. (NYSE: KODK) and Kik Interactive. Even billionaire Mark Cuban dipped his toes in the market with a $25 million investment in the eSports betting company Unikrn.
In early 2018 two exchanges, the Chicago Board of Options Exchange and the CME Group, began trading bitcoin futures and several companies have developed offerings for consumers wanting to diversify their retirement portfolios with cryptocurrencies. BitcoinIRA.com, world’s first and largest company allowing customers to purchase Bitcoin and other digital currencies for their IRA and 401(k) accounts, offers a full-service solution to help set up a qualified cryptocurrency account, roll over funds from an existing IRA custodian, execute live trades on a leading exchange and move funds into a secure, multi-signature digital wallet.
Ultimately, the cryptocurrency industry is in a nascent stage and is still developing day by day. What we know about crypto today could vastly differ from its existence tomorrow, but what is certain is that cryptocurrencies are changing the world and the blockchain technology supporting it is here to stay.