Bitcoin, Bitcoin, Bitcoin. If you don’t know what it is, chances are you’ve heard at least one of your friends groaning about how it tanked, or celebrating a new high, while you sat there confused. Though you may be unfamiliar with it now, that likely won’t be the case for long since cryptocurrency is shaping up to be the future of money as we know it.
Cryptocurrencies are electronic peer-to-peer currencies, meaning they do not physically exist; they are stored in a digital wallet. The first and most popular of these cryptocurrencies is Bitcoin, which was launched in 2009. The goal of cryptocurrency was to solve some of the issues that would arise from money in our current system, such as high transaction fees and long processing times.
This form of currency is decentralized, meaning there is no single data centre where transactions are stored. Instead, blockchain, which is the digital ledger for all cryptocurrency transactions, is stored in servers all around the world to prevent cyberattacks and a central authority from controlling it.
The driving forces behind Bitcoin and approximately 5,000 other cryptocurrencies in the market include the supply, the market demand, the number of competing currencies, and the cost of producing a Bitcoin (through a process known as mining) to name a few.
So, why could this form of currency be the potential future of the financial world?
In Imagine 2030, The Deutsche Bank’s research report, the German bank states that currently cryptocurrency is an addition to the current monetary system, but in the next decade it could become a replacement.
Of course, this form of currency is not without its flaws. It is extremely volatile, often going from an extreme high to an extreme low, making it hard to predict where it will land next. Many with first-hand experience can attest to this.
The advantages that cryptocurrency boasts, however, are not to be overlooked.
Firstly, there is the accessibility aspect. Since users only need an internet-accessing device to send and receive something like Bitcoin, this form of currency becomes widely available to all those who may not have access to traditional banking systems or credit cards.
With the lack of a middleman, fees are also kept to a minimum. This is especially a plus when it comes to international transactions where hidden charges can become a headache.
A big concern with all technology these days is security. This is another area where cryptocurrency may have an edge. Unless a user voluntarily does so, all transactions are seen as anonymous on the blockchain ledger, similar to cash-only purchases. Though cryptocurrency is not entirely untraceable, the security measures that are in effect make it extremely difficult to do so.
Though Bitcoin may still be a topic shrouded in mystery for the average person, only time will tell if this remains the case or, if it could in fact one day be as popular as the monetary systems we have in place today. Though unpredictable, it offers a disruption to the system we are so conventionally used to and caters to the demands that it appears many users are looking for.