The Meaning of Cryptocurrency
In this modern world even the idea of money is changing. Cryptocurrency is quickly gaining ground in the market. It is a type of virtual asset, a digital form of currency with cryptography based security. This currency is protected by complex encryption to prevent counterfeiting and to ensure safe transactions. There are several types of cryptocurrencies. These currencies use blockchain tools to create a decentralized structure, which makes them immune to intrusion by the government authorities. In the simplest terms, cryptocurrency is nothing but limited entries in a ledger which cannot be changed until certain requirements are fulfilled.
The Start of Cryptocurrency
The efforts to create a virtual form of currency, such as DigiCash, started in the 1990s. But these efforts did not bear any fruit because of financial difficulties and frauds. Then more than a decade later, in 2009, Bitcoin was introduced by an anonymous programmer known as Satoshi Nakamoto .
Bitcoin provides an electronic substitute to traditional money. There is no central server in bitcoin transactions. Everybody in the network is involved in the blockchain, so the account balance of every person in the network is public. By adopting this method, bitcoin managed to solve the critical problem of double spending. Every Bitcoin transaction contains the wallet addresses of the sender and the recipient. Then a private key is used by the sender to confirm the transaction.
A person named Laszlo Hanyecz made the first purchase using Bitcoin, when he bought two pizzas for 10,000 BTC in May, 2010. Between 2011 and 2013, Bitcoin gained popularity and it came at par with American Dollar. From 2013 onwards, many other cryptocurrencies emerged, like Ripple, Litecoin and Ethereum. The value of cryptocurrencies, especially Bitcoin, witnessed a meteoric rise in 2017-2018. They became attractive investment opportunities, with the possibility of massive returns. But it hasn’t been smooth sailing through and through for cryptocurrencies.
The Progress of Cryptocurrency
While transferring funds using cryptocurrency, there is no use of a third party. So it removes banks and credit cards from the equation. There is no need to pay fees to a third party for fund transfer. In recent times, the practical use of cryptocurrency has increased. Cryptocurrency can be used to buy goods and to pay for any kind of services online. Many online vendors recognize cryptocurrency as a valid tender.
You can buy products, book flights and hotel rooms, even pay your college fees using cryptocurrency. Increasing number of businesses are accepting payment via cryptocurrency. A good example of this is the company Apple, which has allowed over ten types of cryptocurrencies as a valid mode of payment on its online store. You can also surprise a loved one with a cryptocurrency gift card.
Cryptocurrency is also a lucrative investment. Bitcoin saw unprecedented growth in 2017 and gave rich dividends to investors. Ethereum also witnessed an increase of over 2700 percent in its value, since May 2016. Mining of cryptocurrency is also a kind of investment. Miners are essentially bookkeepers within the blockchain network. Their services are required for confirming a transaction.
However, cryptocurrencies are a volatile investment. It is difficult to predict market fluctuations. Bitcoin’s value was cut in half in 2014, though it later recovered to its initial value by the end of 2016. The encryption used to protect cryptocurrency transactions can be overridden. One such incident happened in 2014 and Mt.Gox stole 850,000 BTC with a current value of about $3 billion. There is practically no regulation of cryptocurrency, so their legality in many countries is cryptic at best.
The Future of Cryptocurrency
Right now cryptocurrency is going through a relatively stable phase. It is tough to predict the future for the virtual currency, but we can hazard a guess. Due to its growing popularity, most people may start using cryptocurrency. John McAfee made a bold prediction that Bitcoin may hit one million dollars by the end of 2020. Another famous name Jeremy Liew, the Snapchat’s owner, predicts that Bitcoin’s value may grow to five million dollars by 2030.
Government authorities can also start using the blockchain technology and create a cryptocurrency of their own. It’ll allow easier management and increase the working efficiency of government departments. The government of Estonia has already started the use of blockchain technology. We might also see Cryptocurrency Exchanges in future, allowing easier trading in the various digital currencies.
The cryptocurrency boom will disrupt traditional finance and banking services. People may have bank accounts for cryptocurrency and use cryptocurrency debit cards. Even the loan services may be in the form of cryptocurrency. However there is still a long way to this scenario and it’ll be possible only if cryptocurrency can prove its stability and safety.
Relevance of Cryptocurrency in South Asia
The journey of Cryptocurrency in South Asia has been treacherous. In the largest South Asian country India, the government does not officially recognize cryptocurrency transactions. However people in India can make investments in cryptocurrency. Some other South Asian countries like Pakistan and Bangladesh have an outright ban on the use of cryptocurrencies.
In Nepal, cryptocurrencies are also illegal. Nepal Rastra Bank has made cryptocurrencies an illegal tender by the 2019 Foreign Exchange Regulation Act. Seven people were arrested by the Central Investigation Bureau of Nepal in 2017, on the charge of running an illegal cryptocurrency exchange and mining operation. It remains to be seen if the Government of Nepal will again legalize cryptocurrencies as many western countries are recognizing the virtual currency transactions.
Note: This article is written by Ken Subedi from Wordinvent.