Cryptocurrency 101: Is it the Future of the Economy?

Cryptocurrencies have made waves in the news as of late, with people becoming more aware about what they are and how they are impacting our lives. Cryptocurrency, or crypto for short, has become increasingly popular for a number of reasons, including the anonymity if affords its users and its decentralization from big central banks. They are practically impossible to counterfeit, and provide a level of security that isn’t available with traditional currency. Cryptocurrency also differs from regular currency as they are entirely determined by market demand. You’ll hear many people ask what gives these “coins” any value, and the answer to that is market demand. People believe in the benefits that cryptocurrencies offers users, therefore it is the reason why it has become much more popular.

Cryptocurrencies typically have a few set characteristics that distinguish them from traditional currency. First, all transactions are irreversible, and cannot be reversed by anyone for any reason. This includes any organization, bank, or group of people. This is different from traditional currency, which allows you to go back and negate a transaction if it was made accidentally. Second, transactions and accounts are not tied to any real-world identities, which gives users a level of anonymity. Third, transactions are much faster than traditional currency. Due to the global nature of cryptocurrency, transactions are confirmed in a matter of minutes, no matter the distance, due to sheer size of the network used to send currency. Fourth, cryptocurrency is based upon cryptographic principles, meaning they are secured with high-level encryption. Finally, cryptocurrencies are completely permissionless, meaning anyone can use them, no matter their nationality or citizenship. Anyone can download the software and begin using it, making it have the potential to be a true global currency. 

Knowing this, it begs the question of how cryptocurrencies will affect the economy in the future. The answer to that depends heavily upon how governments will react to people beginning to use it more. Cryptocurrency is based heavily upon anonymity and severing oneself from being dependent upon centralized currencies. This is the antithesis to what governments are built upon, as they have little to no control over it. If governments begin to react negatively toward the greater level of adoption to cryptocurrency, it can be stopped dead in its tracks if it is deemed illegal. Even if regulation was introduced to make cryptocurrency more suited to government needs, the attractiveness of it would significantly decrease.

Bitcoin is currently the most valuable cryptocurrency, and this year we have seen a meteoric rise in its value. At the start of the year, a single bitcoin was valued at a little under $1000. At the time of writing this, bitcoin is now valued at $16000. There are several other cryptocurrencies that are valued fairly high, including Ethereum and Litecoin. It is clear that people have become to value cryptocurrency much more, and it seems to just be the beginning. With more businesses beginning to accept cryptocurrencies as a form of payment, it’s likely we’ll be seeing much more of it in the future.