Are Bitcoin and other digital currencies the future of money?
Cryptocurrencies…They started as a great idea that hit us like a fly on summer days. Billionaires had been ignoring it since its beginning; however, in the last few months, many companies are accepting it (this is the fact that cryptos are going to be around us for a while). Companies like PayPal, Tesla, and Square started to accept Bitcoin. So, what is it? Will it ever replace the traditional currency?
What a cryptocurrency is?
A cryptocurrency is a digital currency that can be managed through the use of high-level encryption methods known as cryptography.
The culmination of using cryptocurrency happened with Bitcoin in 2009. While in following years, Bitcoin attracted a growing, it achieved notable investor and media attention in 2013 when it peaked at a record $266 per bitcoin. Bitcoin had a market value of over $2 billion at its peak, but a 50% fall quickly.
Thereafter, sparked a furious debate about the future of cryptocurrencies in general and Bitcoin specifically. These days, everyone is asking: will these alternative currencies replace traditional currencies? Or are cryptocurrencies just a trend that soon will be vanished?
Some financial analysts are predicting a big change in crypto as institutional money enters the market. Moreover, some predict that people are looking to invest in Bitcoin, but there still needs to be the interest to want to invest in crypto.
Being a decentralized currency, Bitcoin, uses peer-to-peer technology, which enables all functions as transaction processing, currency issuance and verification to be carried out collectively by the network.
This decentralization does render Bitcoin free from the government interference of manipulation, but there is no central authority to ensure the value of Bitcoin and if things are running smoothly, that’s the flipside. This currency is digitally created through powerful computers to solve complex algorithms and crunch numbers. This process is called “mining”. Currently, Bitcoins are created at the rate of 25 Bitcoins per 10 minutes.
These kinds of characteristics make Bitcoin fundamentally different from a flat currency, a currency that if backed and in full faith of its government. Flat currency’s activity is supervised by a nation’s central bank and is a highly centralized activity. Even though the bank does regulate the amount of currency that is issued in accordance with its policy objectives, there is no upper limit to the amount of that currency issuance, in theory. In addition to that, Bitcoin has no support like flat currency against bank failures which are covered by a government body. The whole value of Bitcoin is dependent on how much investigators are willing to pay for it at one point in time. Also, in case a Bitcoin exchange folds up, a person with Bitcoin balances has no resources to get them back.
Alternatives to Bitcoin
Bitcoin, Ethereum, and Litecoin have risen dramatically over the last year, and are making headlines.
What Is Litecoin?
Litecoin was one of the most popular digital currencies, behind Bitcoin and Ethereum.
Litecoin is that type of digital currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open-source and global payment network that is fully decentralized. What secures the network and empowers individuals controlling their finances is – Mathematics.
How Litecoin Is Different
Litecoin is different than other currencies in a couple of different ways.
First, unlike Bitcoin and Ethereum, Litecoin uses a ‘script to mine units. This somehow prevents individuals from making rigs specifically to mine the currency.
Second, Litecoin has one of the fastest transaction times of the digital currencies (2.5 minutes).
Third, and the most popular ones is that Litecoin is the cheapest of the three major cryptocurrencies.
Ethereum is getting popular among investors over the last year. However, unlike Bitcoin and rival currency Litecoin, Ethereum is being adopted by many companies to do transacts.
In the cryptocurrency wars, some people are considering that Ethereum is like the diamond of the currencies – it has both a fundamental value and an industrial value. On the other hand, Bitcoin operates like gold – it has not much industrial value, but people buy it and sell it based on its inherent value.
Due to the popularity of Ethereum, everyone is getting curious about what it actually is, how it is different from Bitcoin, and how to invest in it.
Ethereum was designed as software to allow developers to run the code of applications. Wait, what? Everyone thought that Ethereum was money. Well, yes! Ethereum has a monetary aspect.
But How Ethereum Is Different from Bitcoin
Bitcoin was created to be a digital currency. Ethereum, on the other hand, using a system called ‘Ether’ was designed in the first place to facilitate Software’s. As a result, people are becoming interested in investing in the Ether.
Finally, Ethereum is much cheaper than Bitcoin. Bitcoin currently trades for over $2,600 per unit, while Ether trades at just $318.
If you’ve been following all of the excitement around Dogecoin, you have probably seen some related media coverage coming from Elon Musk. Thanks to Musk’s tweets, Dogecoin has recently been getting a massive run-up of its own.
But what exactly is Dogecoin and Where Can I Buy Dogecoin?
Back in 2013, Dogecoin started as a joke. Its name comes from a Shiba Inu dog meme.Unfortunately, Dogecoin isn’t supported by many popular cryptocurrency exchanges, such as Coinbase, Gemini, and BlockFi.
What Is the Future of Dogecoin?
Elon Musk has been tweeting for Dogecoin – which he helped to drive up its price. He started tweeting about Dogecoin at the end of last year and he hasn’t stopped yet.
Musk has tweeted his support for the Dogecoin again, again, and again! As long as he keeps tweeting about the coin, people will keep buying it. But, while following social media hype can be a smart short-term trading strategy, it doesn’t necessarily mean that DOGE will have a lasting future.
Ripple or widely known as XRP is different than other cryptocurrencies because it is created by a private company – because they wanted to enable an easy way to send money globally.
Buying Ripple is not easy as is with other cryptocurrencies, because it requires some additional steps.
Ripple was created as a payment processing platform that allows global transactions using its coin, XRP.
Like other cryptocurrencies, there is a high risk if you are considering investing in Ripple. However, because of the low price, why not investing in it – you might be thanking yourself in several years.
Cardano is that type of cryptocurrency that actually tried to solve problems that bother Bitcoin. It was created in 2017.
Cardano uses a currency called Ada. However, most people simply refer to it as Cardano. Cardano is trying to be different from Bitcoin, they want to deliver a secure and sustainable blockchain that can protect user privacy, but on the other hand, meets the needs of regulators as well.
Lately, Cardano has become popular – and its value has risen dramatically.
How to use and store bitcoins and cryptocurrencies
If you make up your mind and decided to use Bitcoin or any other cryptocurrency – you need to have a digital wallet.
A cryptocurrency wallet is a software program that stores private and public keys. Of course, they interface with various blockchains – to help users to monitor their balance, and do transactions.
For example, if a person sends you bitcoins, they transfer the ownership of coins to your wallet address. There are several types of wallets that provide different ways to store and access your digital currency. The most popular ones are Exodus Wallet, Electrum, Mycelium, Ledger Nano X, Ledger Nano S, Trezor Model T, etc.
Should You Invest in Cryptocurrencies?
If you have ever considered investing in cryptocurrencies, you should bear in mind that you have to treat your investment as any other venture.
You should also keep in mind that there is a chance you can lose most of your investment.
Cryptocurrency has no fundamental value, despite the buyer’s willingness to pay for it. The cryptocurrency is very sensitive to price fluctuations, which increases the risk of losing investments. If you are not able to tolerate that kind of volatility, you can always look elsewhere for investments that are suitable for you.
What Does it Hold the Future of Cryptocurrency?
There are a lot of problems that virtual currencies presently face: digital fortune can be erased by a computer crash, can be stolen by a hacker. But these problems that cryptocurrencies face may be overcome in the future through technological advances.
Nowadays, cryptocurrencies are accepted by a minor number of retailers, the number is increasing, but there is still work to do. To be widely used, they have to be first accepted by consumers.
To become part of the mainstream financial system – cryptocurrencies have to accomplish some criteria. It should avoid hacker attacks; they should be easy to understand; preserve user anonymity without being a conduit for tax evasion, money laundering, and other bad activities. These are very challenging criteria to satisfy, but there is a possibility that cryptocurrency in a few years could be part of our lives.
The rise of Bitcoin and other cryptocurrencies has divided the opinion about its future. The success of Bitcoin has inspired entrepreneurs to create alternative cryptocurrencies such as Ethereum, Litecoin, Ethereumor Dogecoin. A cryptocurrency that wants to become part of the financial system would have to meet some divergent criteria. While that possibility looks far away from happening, there is a doubt that Bitcoin’s success or failure in dealing with difficulties may determine the future of other cryptocurrencies in the years to come.