A lot has been spoken about cryptocurrencies in recent years. While aficionados claim it will be the currency of future, detractors dismiss it as a bubble waiting to burst causing huge financial losses to investors. Regardless of which side one takes, crypto-currencies are here to stay and become tender of the future.
However, it is vital to know a few basics about crypto-currencies before rushing to invest.
Crypto-currency is not metal and paper currency and does not exist in form of coins and notes. Instead, it owes its existence to the Internet and an online process called ‘Blockchain.’
Every crypto-currency is deregulated. This means, no government, bank, an organization has total control over this form of money.
Usually, governments keep collateral such as gold or derivatives as a guarantee for the value of the money they print. Hence, their money is called fiat currency. Crypto-currencies do not have any collateral.
Political and economic situation decides the rates of fiat currency. Market demand and supply influences the rate of crypto-currencies.
Since crypto-currencies exist only in the cyber-space, they have to be stored, carried and traded electronically. This is done through online crypto-currency wallets, software and off-line wallets and hardware wallets.
Tracing ownership of fiat currencies is possible since it passes through banks and financial institutions. Owners of crypto-currencies remain anonymous. Anyone can buy or sell crypto-currencies and keep their identity secret.
However, to buy crypto-currency, you need to pay fiat currency. This is what lends them the price. Crypto-currency can be bought or sold with regular money.
Governments around the world remain undecided over regulating trade in crypto-currencies. In some countries, trading in crypto-currencies is banned by law while others indicate limited acceptance.
Due to anonymity, crypto-currency is emerging as tender of choice among terror outfits, drug syndicates, cyber-criminals and tax evaders, among others. This has brought crypto-currency trade under the scanner of law enforcement agencies of various countries.
Unfortunately, several scams involving crypto-currencies are common nowadays. Criminals persuade crypto-currency owners to part with their access codes and passwords. Others make tempting offers to pay rewards in crypto-currencies for participating in Ponzi schemes. Crypto-currencies once lost cannot be traced: they are lost to everyone.
Since the price of crypto-currencies is very high, it eliminates the need to carry cash. For example, a single Bitcoin traded at US$9,350 by mid-May 2018.
Crypto-currencies are borderless. This feature allows investors the ease of trading them from any country, provided they have access to the Internet.
Increasing number of merchants is now accepting crypto-currencies. You can buy anything from pizza to high-end jewelry, avail travel services or indulge in carnal pleasures and gambling with crypto-currencies.
Though some of these features of crypto-currencies are undesirable, they do serve a purpose when it comes to using them as tender for investment or merely to buy goods and services. These characteristics work in favor of crypto-currencies to become future money.
Crypt-currencies: Money of Future
There are several good reasons why crypto-currencies are headed to become the money of future.
An increasing number of retailers, investment companies, travel organizations and charities now accept crypto-currencies. This is because transactions are speedier and can be done without the hassle of meeting government regulations.
Crypto-currencies such as Bitcoin can be divided into its millionth part. A fraction of Bitcoin is called Satoshi. This is not possible with fiat currencies.
There are several legitimate ways to earn free crypto-currencies, especially the Bitcoin. For example, some hotels and restaurants allow customers to tip with crypto-currencies. Those who wish to stay anonymous pay crypto-currency to individuals who assist in any service.
Blockchain is the ledger keeping mechanism of any crypto-currency. Working as ‘miner’ or ledger-keeper for one or more crypto-currencies enables you to get them free, as a reward for your efforts.
The number of exchanges where one can buy and sell crypto-currencies is increasing. In some countries, you can also buy or sell crypto-currencies through specialized ATMs.
Though highly debatable, printing fiat currencies leaves a significant carbon signature and causes damage to the environment. Crypto-currencies have been blamed for using large volumes of electricity- consumed by miners who access the Blockchain.
Though Bitcoin remains undisputed king of crypto-currencies, others such as Ethereum, Lite Coin and ZCash, Dash, Ripple, and Monero are fast becoming popular. This indicates a clear swing from traditional, cash investments to unconventional techniques involving crypto-currencies.
Since crypto-currencies are unregulated, a bank or government cannot deny its access to anyone. Banks can freeze accounts and funds of their customers for any reason. This is not possible with crypto-currencies: you remain in charge of your money and nobody can deny access.
Crypto-currencies can be carried in a software wallet installed on smart-phone or accessed in your online account. Alternatively, they can be carried in hardware wallets that are the size of a USB memory stick but comes with access codes and passwords. Hence, you can effortlessly and safely carry a large amount of crypto-currencies worth huge sums in real money.
Despite wild fluctuations in prices, crypto-currencies have a history of bouncing back. This means, investing in crypto-currencies does offer high returns. However, getting the desired rate can sometimes take a few months, since prices are decided by market demand and supply.
Unless you give secret access codes and passwords, hackers or criminals cannot touch your investment in crypto-currencies. This means, your money is safe.
Nowadays, some stockbroking firms accept crypto-currencies when you buy large amounts of publicly traded shares. This makes an investment in crypto-currencies even more attractive.
Understandably, it will be some time before crypto-currencies are accepted as legal tender across the globe. Some governments have indicated interest in regularizing crypto-currency trade, which will enable more merchants and investors to trade legally. The Blockchain is much safer than banking systems of some countries and hacking is impossible. This makes crypto-currencies an attractive proposition for anyone who wishes to keep large amounts of money safe.