Future of Cryptocurrencies
Decrypted: The Future of Cryptocurrencies
July 15, 2022 12:46 AM
Future of Cryptocurrencies
July 15, 2022 12:46 AM
A cryptocurrency can be described as a digital currency created and managed using advanced encryption techniques called cryptography. With the 2009 creation of Bitcoin, cryptocurrency went from an academic idea to a (virtual) reality.1. In April 2013, Bitcoin reached a new high when it hit $266 per bitcoin. This was after it had risen 10-fold in the previous two months. Bitcoin reached a peak market value of more than $2 billion.
However, it saw a 50% drop shortly after. This sparked a heated debate about the future and prospects of cryptocurrencies. Are cryptocurrencies just a passing trend that will fade away soon? Bitcoin is the answer.
Even in the bear market, the global cryptocurrency market capitalization remains at $143 billion. The global market reached $834 billion at its peak. These numbers are still impressive, even for crypto doomsayers and naysayers.
It's not all easy, though. There have been many scams and hacks over the past ten years. In the last year, a massive army of Twitter bots stole Ethereum from thousands upon thousands of users. Another $1 billion was also stolen from crypto exchanges around the world. Nevertheless, the crypto industry thrives, and many major players have jumped on board. For example, IBM now uses Stellar to run its World Wire, a global money transfer service that will rival SWIFT. JP Morgan is also developing its cryptocurrency on Ethereum .
The crypto market has been insane over the last ten years, and it is expected that the next ten years will be even crazier.
Let's look at the possible changes in the crypto industry and predict the unforeseeable. We'll start with blockchain technology trends and then look at the most popular cryptocurrencies and how they may evolve..
Stablecoins will be more popular. We were astonished by the incredible popularity of stablecoins. In 2018, hundreds of them were created, all to accurately represent the U.S. dollar digitally. Some were more successful than others.
Mainstream businesses have recently entered the crypto market. Instead of using Bitcoin and other cryptocurrencies, they are now turning to stablecoins. For example, JP Morgan has created its stablecoin backed by the U.S. dollar, JPMCoin. Facebook is also rumored to be building its stablecoin for use on Whatsapp or Facebook.
Security tokens could be a big hit.
The crypto industry is buzzing about security tokens. These are securities that are issued to identified, authenticated investors. They are expected to replace ICOs and have a comparable or even greater impact. Progress, to date, has been unremarkable--there's been no rush toward security tokens as yet. However, if they succeed, there is more potential for long-term success than with ICOs because institutional investors are more likely to be involved. Decrypt was told by Graham Rodford, Archax CEO, a London-based security token exchange.
Rodford expressed optimism about the market's future direction, as might be expected. He stated that the supporting ecosystem would continue to emerge for the remainder of 2019, with key players in primary and secondary issuance, custody, and secondary market trading. In addition, he said more explicit regulations would increase the number of security tokens.
As with any industry, crypto is filled with hacks, exit scams, and theft. Crypto is a new and complex form of money, and many consumers don't know how to use it. Scammers find it irresistible to use this new money.
These scams range from simple Twitter bots that ask people to send Ethereum to scammers' accounts to the more severe Mt. Gox hack. Last week, $13,000,000 worth of EOS was stolen from Korea's largest crypto exchange, Bithumb. This was its second significant loss of customer funds.
If exchanges don't implement security measures, hackers and scammers will likely continue to plague the market. The good news is that the ETH scammers have all but disappeared after the crypto winter. However, they may return if there's a rebound in the market.
Scams, hacks, and theft offer opportunities for custodial cryptocurrency services and security teams. They can provide better services to crypto exchanges that have lots of money and can afford them. The first blockchain analytics companies have made a profit and have increased their ability to track bad actors using public blockchain and crypto-based startups' data. Although an increase in security products may help prevent exchange hacks and other thefts, more education is necessary to avoid users becoming victims of scammers. Coinbase deserves credit for starting the effort to educate users.
It won't be easy to purchase crypto anonymously.
Libertarian Erik Voorhees declared that his crypto exchange FormShift had added know-your-customer protocols "under duress" as a sign that crypto anonymity was ending. Although Bitcoin transactions don't reveal the sender, KYC protocols require personal data, such as a copy or passport.
Nearly every fiat-to-crypto onramp now uses KYC protocols. In recent weeks, KYC has been implemented by even the last bastions of person-to-person exchanges, like LocalBitcoins or Paxful. This will make it harder for people to buy crypto without their details. It may also encourage black-market networks in meatspace as people try to bypass the controls.
The crypto-blockchain will be more transparent.
With more widespread KYC protocols and public blockchain transactions, blockchain analytics companies find it easier to build a real-time ecosystem picture, track money flows, and track bad actors. This ability raises security issues. It makes it easier to monitor your financial transactions without having to log in to your bank account.
Many economists predict a significant change in crypto as institutional money enters.3. However, an ETF would make it much easier to invest in cryptocurrencies and blockchain technology. However, demand for crypto investment might still be a challenge.
Bitcoin, a decentralized currency, uses peer-to-peer technology. This allows all functions, such as currency issuance and transaction processing, to be performed collectively by the network. However, no central authority can ensure the currency's value or control its operation. The process of creating Bitcoins digitally is called "mining." This requires computers that can solve complicated algorithms and crunch numbers. They are currently being made at a rate of 25 bitcoins per 10 minutes.
These characteristics make Bitcoin fundamentally distinct from fiat money, which is backed entirely by the faith and credit of its government. Fiat currency is issued by a central bank that oversees the activity. Although the central bank controls the money, there is no limit on the total amount. Local currency deposits are also generally protected against bank failures by government bodies. Bitcoin, however, does not have such support mechanisms. The price of Bitcoin depends on how much investors will pay. Clients with Bitcoin balances can not get them back if a Bitcoin exchange is closed.
Much debate surrounds the prospects of bitcoin. Although crypto-evangelists are increasing in the financial media, Kenneth Rogoff, a Harvard University professor of Economics and Public Policy, suggests that crypto advocates believe that the total "market capitalization" of cryptocurrency could explode over the next five years to reach $5-10 trillion.
He said that the historical volatility of the asset class is not a reason to panic. He tempered his optimism, as well as that of "crypto evangelists," and called Bitcoin "nutty." He stated that Bitcoin's long-term value is more likely to be $100 than $100,000.8.
Rogoff claims that Bitcoin's use is restricted to transactions and not physical gold. This makes it more susceptible to a bubble-like crash. In addition, the cryptocurrency's energy-intensive verification process makes it less efficient than systems that rely upon a central authority such as a central bank.
Bitcoin's principal benefits of decentralization, transaction anonymity, and money laundering have made it a preferred currency for many illegal activities, including drug peddling, weapons procurement, and money laundering. This has drawn the attention of other powerful government agencies, such as the Financial Crimes Enforcement Network ("FinCEN"), the SEC, the FBI, and the Department of Homeland Security ("DHS"). FinCEN published rules in March 2013 that classified virtual currency exchanges as money service businesses. The DHS froze an account held at Wells Fargo at Mt. Gox, the largest Bitcoin exchange. The DHS also subpoenaed 22 emerging payment companies in New York, many of whom handled Bitcoin, to inquire about their anti-money laundering measures and consumer protection.
Although some of the limitations cryptocurrencies currently face, such as the possibility that one's digital fortune could be lost or that someone might hack a virtual vault, others may be overcome with technological advancements. However, the fundamental paradox of cryptocurrencies will prove difficult to overcome: the more they become popular, the more government and regulatory scrutiny they will attract, thus weakening their foundation.
While there has been an increase in merchants accepting cryptocurrencies, it is still relatively rare. To be more widely accepted by consumers, cryptocurrencies must first become mainstream. Unfortunately, their relative complexity will deter most people, except those who are technologically proficient.
It may be necessary to meet a wide range of criteria for the cryptocurrency trend to be accepted into the mainstream financial system. For example, to avoid fraud and hacker attacks, it would have to be mathematically complicated but straightforward to understand by consumers; decentralized with adequate consumer protections; and maintain anonymity while not being a conduit for tax evasion or money laundering. These are complex criteria to meet. Although it seems unlikely, Bitcoin's ability to overcome the many challenges it faces will likely determine the fate of another cryptocurrency in the future.
You might better treat your cryptocurrency investment like any other highly speculative venture. You risk losing most, if not all, of your investment. A cryptocurrency does not have intrinsic value other than what a buyer will pay at any moment. It is, therefore, susceptible to large price swings, which can increase the risk of an investor losing capital. For example, bitcoin plunged from $260 down to $130 in just six hours on April 11, 2013. It would be best if you considered other investments that could handle this level of volatility. Although opinions remain divided on Bitcoin's merits as an investment, supporters point out its limited supply and growing use as value drivers. Detractors view it as a speculative bubble. This is one issue conservative investors should avoid.
Bitcoin's emergence has led to much discussion about the future of cryptocurrencies. Despite Bitcoin's current problems, its popularity since 2009 has inspired the creation of Ethereum. To be accepted into the mainstream financial system, a cryptocurrency must meet very different criteria. Although it seems unlikely, Bitcoin's ability to overcome the obstacles and succeed or fail in the future will significantly impact the fortunes of other cryptocurrencies.