Bitcoin, the first cryptocurrency, has experienced an exciting ride since its debut in the year of 2009. In the course of this year it was reported that the cost in one Bitcoin increased to more than $60,000, a doubling within a period of 12 months. Then , it dropped to half of that amount within just a few weeks. The prices of other cryptocurrency like Dogecoin are also on the rise. Dogecoin’s value has been rising and then dropped even more mostly based on Elon Musk’s twitter posts. Despite the recent decline in their price however, the total worth of all cryptocurrency now is more than $1.5 trillion, an astonishing sum for devices that function as just computer code. You must find an immediate edge in order to succeed. Are cryptos the next big thing and should you consider investing and using them? Are the huge swings in their prices – nearly $1 trillion was erased off their entire value in May — signal problems to the banking system?
Bitcoin was developed (by an individual or organization that is still unidentified until today) to serve as method of conducting transactions without the involvement by a trusted third party like central banks or financial institution. The rise of Bitcoin in the midst of the financial crisis in the world, which shaken trust in banks and even the government it was perfectly timed. Bitcoin enabled transactions with just digital IDs, giving users a certain degree of privacy. This led to Bitcoin the most popular currency to finance illicit activities, like recently-discovered ransomware threats. Bitcoin was the main force behind the dark web of online commerce that is illegal, just like PayPal has helped in the rise of eBay through its ease of payment.
While the whirlwind price of Bitcoin attracts attention, its main impact is the revolution in finance and money that it has triggered which will eventually affect everyone of us in both ways.
With the rise of its popularization, Bitcoin became cumbersome, slowand costly to make use of. It takes approximately 10-minutes to confirm the majority of transactions made using Bitcoin and the transaction cost is an average of around $20 in the past year. The fluctuating value of Bitcoin has rendered it a non-viable method of exchange. It’s as if your 10 dollars could get you a drink one day and a bottle or bottle of fine wine the next.
Additionally, it has become evident that Bitcoin doesn’t provide complete security or anonymity. The success of the government in finding and regaining a portion of Bitcoin ransom that was paid to the hacking group DarkSide as part of the Colonial Pipeline ransomware attack has increased doubts regarding the security and traceability in Bitcoin transactions.
Although Bitcoin has not met its stated goals however, it has turned into an investment of speculation. This is a mystery. It is not a currency with any intrinsic value and is not supported by any other source. Bitcoin supporters will inform that, just like gold, its worth comes due to its scarcity. The algorithm used by Bitcoin requires the creation of a fixed limit of 21 million bitcoins (nearly 19 million have been issued to date). But the mere fact of scarcity cannot be an indicator of value. Bitcoin investors appear to be using the concept of the greater fool. All you require to earn a profit from investing is find someone willing to purchase the asset for a greater cost.
Despite their high value for paper assets, the crash in the value of Bitcoin and other cryptocurrencies is unlikely shake our financial systems. The banks have largely remained in the shadows. Similar to any bubble that is speculative those who arrive to the party late are the most at chance of suffering losses. The government must be sure to warn consumers that, just as they did with the Game Stop story that they do so at their own risk. Securities that allow the speculation of Bitcoin price are already controlled and regulated, however, there’s nothing more the government can do or should do.
Bitcoin isn’t a harmless thing. Transactions get processed via “miners” using massive amounts of computing power, in exchange for benefits in the form of Bitcoin. According to some estimates, it is estimated that the Bitcoin blockchain consumes more energy than whole nations like Argentina and Norway in addition to the huge amounts of electronic garbage generated by the specially-designed machines used to mine the Bitcoin network which are rapidly depleted.
Whatever the outcome of Bitcoin’s future however, the Blockchain technology is innovative and revolutionary. Bitcoin has proven that applications operating on computer networks can be utilized to safely make payments within and between nations with no reliance on financial institutions that charge steep costs. For workers who are migrant and sending money back to their homelands for example, such fees can be a significant burden. Technology that makes payments less expensive faster, more efficient and easier to track will benefit both business and consumers, while aiding both international and domestic commerce.
The technology comes with dangers. Facebook plans to launch its own cryptocurrency, Diem that is designed to make online payments more convenient. In contrast to Bitcoin, Diem would be 100% secured through reserves made up of U.S. dollars or other major currencies, which will ensure stability in value. However, like its other seemingly high-minded projects, Facebook can hardly be relied upon to put the interests of the people over its own. The idea of big corporations in the near future releasing their own cryptocurrency without backing is a source of concern. These currencies will not threaten against the U.S. dollar, but could destroy the currencies of the smaller and less developed countries.
The Bitcoin technology is making a myriad of financial services and products available to everyone at a low cost direct connecting savers with the borrowers. The developments and possibilities that are created by new technology have prompted central banks to look into releasing virtual versions of their currency. China, Japan as well as Sweden have currently testing their own digital currencies こちら.
However, instead of truly the financial system more open to all some of these technological advances can increase inequality. Inequal financial literacy and internet access may result in highly skilled investors reaping the benefits, while those who are less fortunate in awe of new technology and taking on risks that they aren’t sure about. Computer algorithms may exacerbate discrimination based on race, gender and other factors in financial and credit score decisions, instead of diminishing their impact. The widespread use of digital payment systems can also destroy any privacy vestiges that remain that we have in our daily lives.
While the whirlwind price of Bitcoin attracts interest, the main impact is the transformation in the world of finance and money that Bitcoin has created which will eventually affect everyone of us in both ways.
Vivek is a published author of Meidilight and a cofounder of Zestful Outreach Agency. He is passionate about helping webmaster to rank their keywords through good-quality website backlinks. In his spare time, he loves to swim and cycle. You can find him on Twitter and Linkedin.