Skip to main content

Cryptocurrency: The Fintech Disruptor

Blockchains, sidechains, mining - terminologies in the clandestine world of cryptocurrency keep piling up by minutes. Although it sounds unreasonable to introduce new financial terms in an already intricate world of finance, cryptocurrencies offer a much-needed solution to one of the biggest annoyances in today's money market - security of transaction in a digital world. Cryptocurrency is a defining and disruptive innovation in the fast-moving world of fin-tech, a pertinent response to the need for a secure medium of exchange in the days of virtual transaction. In a time when deals are merely digits and numbers, cryptocurrency proposes to do exactly that!

In the most rudimentary form of the term, cryptocurrency is a proof-of-concept for alternative virtual currency that promises secured, anonymous transactions through peer-to-peer online mesh networking. The misnomer is more of a property rather than actual currency. Unlike everyday money, cryptocurrency models operate without a central authority, as a decentralized digital mechanism. In a distributed cryptocurrency mechanism, the money is issued, managed and endorsed by the collective community peer network - the continuous activity of which is known as mining on a peer's machine. Successful miners receive coins too in appreciation of their time and resources utilized. Once used, the transaction information is broadcasted to a blockchain in the network under a public-key, preventing each coin from being spent twice from the same user. The blockchain can be thought of as the cashier's register. Coins are secured behind a password-protected digital wallet representing the user.

Supply of coins in the digital currency world is pre-decided, free of manipulation, by any individual, organizations, government entities and financial institutions. The cryptocurrency system is known for its speed, as transaction activities over the digital wallets can materialize funds in a matter of minutes, compared to the traditional banking system. It is also largely irreversible by design, further bolstering the idea of anonymity and eliminating any further chances of tracing the money back to its original owner. Unfortunately, the salient features - speed, security, and anonymity - have also made crypto-coins the mode of transaction for numerous illegal trades.

Just like the money market in the real world, currency rates fluctuate in the digital coin ecosystem. Owing to the finite amount of coins, as demand for currency increases, coins inflate in value. Bitcoin is the largest and most successful cryptocurrency so far, with a market cap of $15.3 Billion, capturing 37.6% of the market and currently priced at $8,997.31. Bitcoin hit the currency market in December, 2017 by being traded at $19,783.21 per coin, before facing the sudden plunge in 2018. The fall is partly due to rise of alternative digital coins such as Ethereum, NPCcoin, Ripple, EOS, Litecoin and MintChip.

Due to hard-coded limits on their supply, cryptocurrencies are considered to follow the same principles of economics as gold - price is determined by the limited supply and the fluctuations of demand. With the constant fluctuations in the exchange rates, their sustainability still remains to be seen. Consequently, the investment in virtual currencies is more speculation at the moment than an everyday money market.

In the wake of industrial revolution, this digital currency is an indispensable part of technological disruption. From the point of a casual observer, this rise may look exciting, threatening and mysterious all at once. While some economist remain skeptical, others see it as a lightning revolution of monetary industry. Conservatively, the digital coins are going to displace roughly quarter of national currencies in the developed countries by 2030. This has already created a new asset class alongside the traditional global economy and a new set of investment vehicle will come from cryptofinance in the next years. Recently, Bitcoin may have taken a dip to give spotlight to other cryptocurrencies. But this does not signal any crash of the cryptocurrency itself. While some financial advisors emphasis over governments' role in cracking down the clandestine world to regulate the central governance mechanism, others insist on continuing the current free-flow. The more popular cryptocurrencies are, the more scrutiny and regulation they attract - a common paradox that bedevils the digital note and erodes the primary objective of its existence. Either way, the lack of intermediaries and oversight is making it remarkably attractive to the investors and causing daily commerce to change drastically. Even the International Monetary Fund (IMF) fears that cryptocurrencies will displace central banks and international banking in the near future. After 2030, regular commerce will be dominated by crypto supply chain which will offer less friction and more economic value between technologically adept buyers and sellers.

If cryptocurrency aspires to become an essential part of the existing financial system, it will have to satisfy very divergent financial, regulatory and societal criteria. It will need to be hacker-proof, consumer friendly, and heavily safeguarded to offer its fundamental benefit to the mainstream monetary system. It should preserve user anonymity without being a channel of money laundering, tax evasion and internet fraud. As these are must-haves for the digital system, it will take few more years to comprehend whether cryptocurrency will be able to compete with the real world currency in full swing. While it is likely to happen, cryptocurrency's success (or lack thereof) of tackling the challenges will determine the fortune of the monetary system in the days ahead.




Source by Riasat Noor

Popular posts from this blog

The Basics of Cryptocurrency and the Way It Works

In the times that we're living in, technology has made unbelievable advancement as compared to any time in the past. This evolution has redefined the life of man on almost every aspect. In fact, this evolution is an ongoing process and thus, human life on earth is improving constantly day in and day out. One of the latest inclusions in this aspect is cryptocurrencies.Cryptocurrency is nothing but digital currency, which has been designed to impose security and anonymity in online monetary transactions. It uses cryptographic encryption to both generate currency and verify transactions. The new coins are created by a process called mining, whereas the transactions are recorded in a public ledger, which is called the Transaction Block Chain.Little backtrackEvolution of cryptocurrency is mainly attributed to the virtual world of the web and involves the procedure of transforming legible information into a code, which is almost uncrackable. Thus, it becomes easier to track purchases an…

Forex MegaDroid - The Trading Robot That Applies Two Trading Strategies

It is important for novice traders to gain the basic knowledge of Forex trading at the very beginning of their attempts. After you get the rough ideas of what those charts, tables and axis mean, then you should study in details about which trading style suits you the most. Currency trading involves completely different styles. People should opt for their own strategies, but basically there are two primary types of analysis: the technical and the fundamental. A few traders would choose one of the two, some will combine them, others just follow what the robot tells them. Forex Megadroid belongs one of the few automated programs that applies both trading strategies. Forex traders who choose to use technical analysis always base their analyzes on the currency market trend. They read charts and recognize the common patterns for the price movement. Different traders may employ various reporting system to make the analysis easy to read or update. For the users of technical analys…

Virtual Currency Games

Every little boy's (and many grown men's) dream of making a living by playing video games is edging closer to reality. The recent release of HunterCoin and the in-development VoidSpace, games which reward players in digital currency rather than virtual princesses or gold stars point towards a future where one's ranking on a scoreboard could be rewarded in dollars, and sterling, euros and yen.The story of the millionaire (virtual) real estate agent... Digital currencies have been slowly gaining in maturity both in terms of their functionality and the financial infrastructure that enables them to be used as a credible alternative to non-virtual fiat currency. Though Bitcoin, the 1st and most well known of the crypto-currencies was created in 2009 there have been forms of virtual currencies used in video games for more than 15 years. 1997's Ultima Online was the first notable attempt to incorporate a large scale virtual economy in a game. Players could collect gold coins …