Cryptocurrencies are systems that allow for the secure payments of online transactions that are denominated in terms of a virtual token, representing ledger entries internal to the system itself. The word crypto refers to the fact that various encryption algorithms and cryptographic techniques, such as elliptical curve encryption, public-private key pairs, and hashing functions, are employed.
The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym, Satoshi Nakamoto. As of October 2018, there were over 17.33 million bitcoins in circulation with a total market value of around $115 billion. Bitcoin's success has spawned a number of competing cryptocurrencies, known as "altcoins" such as Litecoin, Namecoin and Peercoin, as well as Ethereum, EOS, and Cardano. Today, there are literally thousands of cryptocurrencies in existence, with an aggregate market value of over $200 billion.
2.0ADVANTAGES OF CRYPTOCURRENCY
2.1Fraud
Individual’s cryptocurrencies are computerized and can't be forged or reversed arbitrarily by the sender, as with credit card charge-backs.
2.2Immediate Settlement
Purchasing real property typically will involves third parties such as lawyers, notary, delays, and payment of fees. In many ways, the cryptocurrency blockchain is like a “large property rights database,” says Gallippi. Bitcoin contracts can be structured and authorized to wipe out or include outsiders, reference external facts, or be completed at a future date or time for a small amount of the cost and time required to complete traditional asset transfers.
2.3Lower Fees
There aren’t usually transaction fees for cryptocurrency exchanges because the miners are compensated by the network. Despite the fact that there's no transaction fees, a lot of people expect that most users will engage a third-party service, such as Coinbase, creating and maintaining their bitcoin wallets. These services act like Paypal does for cash or credit card users, providing the online exchange system for bitcoin, and as such, they’re likely to charge fees. It's fascinating to take note of that Paypal does not acknowledge or exchange Bitcoins.
2.4Identity Theft
When you give your credit card to a merchant, you give him or her access to your full credit line, regardless of whether the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store store starts the installment and pulls the assigned amount from your account. Cryptocurrency uses a “push” mechanism that enables the cryptocurrency holder to send precisely what he or she wants to the merchant or recipient with no additional data.
2.5Access to Everyone
There are approximately 2.2 billion individuals with access to the Internet or mobile phones who currently didn’t have the access to traditional exchange, these people are prepared for the Cryptocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer, and microfinancing service recently announced a bitcoin device, with one of every three Kenyans currently owning a bitcoin wallet.
2.6Decentralization
A worldwide network of computers use blockchain technology to jointly manage the database that records Bitcoin transactions. That is, Bitcoin is overseen by its network, and not any one central authority. Decentralization implies the system operates on a user-to-user (or peer-to-peer) basis. The types of mass collaboration this makes possible are just beginning to be explored.
2.7Recognition at universal level
Since cryptocurrency isn’t bound by the exchange rates, interest rates, transactions charges or other charges of any country; therefore it can be utilized at an international level without encountering any problems. This, in turn, saves lots of time as well as money on the part of any business which is otherwise spent in transferring money from one country to the other. Digital money or cryptocurrency operates at the universal level and hence makes transactions simpler.
3.0DISADVANTAGES OF CRYPTOCURRENCY
3.1Scalability
Probably the greatest concern with cryptocurrencies are the problems with scaling that are presented. While the quantity of digital coins and adoption is expanding rapidly, it is still predominated by the number of transactions that payment giant, VISA, processes each day. Furthermore, the speed of a transaction is another important metric that cryptocurrencies cannot contend with on the same level as players like VISA and Mastercard until the infrastructure delivering these technologies is enormously scaled. Such an evolution is complex and difficult to do flawlessly. However, some have just proposed a few solutions, including lightning networks, sharding, and staking as options to overcome the scalability issue.
3.2Cybersecurity issues
As a digital technology, cryptocurrencies will be liable to cybersecurity breaches, and may fall into the hands of programmers or hackers. We have already seen the evidence, with multiple ICOs getting breached and costing investors hundreds of millions of dollars this summer alone (one of these attacks by itself resulted in the loss of $473 million). Mitigating this will require constant upkeep of security infrastructure, but we are already seeing many players managing this straightforwardly, and using upgraded cybersecurity measures that go beyond those used in the traditional banking industries.
3.3Price volatility and lack of inherent value
Price volatility, tied to a lack in inherent value, is a noteworthy issue, and one of the specifics that Buffet referred to specifically when he characterized the cryptocurrency ecosystem as a bubble. It is an important concern, but one which can be overcome by connecting the cryptocurrency value directly to tangible and intangible assets (as we have seen some new players do with diamonds or energy derivatives). Expanded appropriation ought to likewise build shopper certainty and decline this instability.
3.4Regulations
Buffet also touched on this problem in his recent talk:
“It doesn’t make sense. This thing is not regulated. It’s not under control. It’s not under the supervision [of] any…United States Federal Reserve or any other central bank. I don’t believe in this whole thing at all. I think it’s going to implode.”
Regardless if we perfect the technology and dispose of the considerable number of issues recorded, until the technology is adopted by federal governments and regulated, there will be increased risk in investing in this technology.
Other concerns with the technology are mostly logistical in nature. For instance, changing protocols, which becomes necessary when the tech is being improved, can take quite a long time and interfere the normal flow of the operations.
4.0CONCLUSION
For conclusion, cryptocurrencies have a long way to go before they can replace credit cards and traditional currencies as a tool for worldwide trade. To be truth, there are a lot of people still unaware of digital money or cryptocurrency. People need to be educated about cryptocurrency to be able to apply it to their lives.