Cryptocurrencies are a digital medium of exchange. The first cryptocurrency to operate was Bitcoin in 2009, and since then, over 1,400 different types have been created. In cryptocurrency systems, the security, integrity, and balance of your accounts are guaranteed through a set of agents (also called miners) that are generally public and actively protect the network by maintaining a high algorithm processing rate (rules and instructions) in order to receive a small tip.
These cryptocurrencies have almost impenetrable security, since all users are part, and, therefore, is regulated by all of them. It is estimated that in order to break the Bitcoin security system, a technological capacity equivalent to that of Google would be required.
Cryptocurrencies make possible the so-called Internet of value, also known as the Internet of money: they are applications that allow the exchange of value in the form of cryptocurrencies. This value can be in the form of contracts, intellectual property, shares, or any valuable property. These exchanges, however, can already be done through companies such as Paypal. But the difference between paying as Paypal and paying with a cryptocurrency is that when paying with Paypal requires that payment be made through private networks such as credit cards or banks, while payment with cryptocurrencies has no intermediaries. In this way, a universal value transfer system, free of intermediaries, is obtained.
Any entity does not regulate cryptocurrencies, users are the ones who directly control them through speculation, assumptions of professionals who try to determine how the purchase and sale of each currency will vary, therefore, if many people want to sell their cryptocurrency, it will be devalued, and its price will fall, on the contrary, if many people want to buy it, high demand will make its price increase.
Another essential fact about cryptocurrencies is that they are valid in any country in the world, which facilitates the movement of money between users. Apart from the coins, they only belong to the owner who owns them, and nobody can intervene in their use.
What Type of Cryptocurrencies Exist:
Bitcoin (symbol: ₿; abbreviation: BTC) is the most common cryptocurrency, it is a decentralized cryptocurrency, in other words, there is no financial institution that regulates it as, for example, in the case of the Euro which the European Central Bank controls it.
In August 2008, Bitcoin.org was registered. In January of the following year, the first Bitcoin network was launched and began to have the first clients. The first transfer of Bitcoins from Satoshi Nakamoto to Hal Finney takes place. In October 2009, the first dollar – Bitcoin exchange value was published. The price of the first Bitcoins was considered at $ 0.
Bitcoin is subdivided into 100 million smaller units called Satoshi. It is the most used alternative currency with a total market equivalent to 100 million USD. As it is not created by a central entity, the Bitcoin peer-to-peer network regulates the creation and exchange of Bitcoins according to the software of the same network. There are nodes that are dedicated to creating and verifying Bitcoins through mathematical operations that require significant computing power. It has been established that there will be no more than 21 million Bitcoins, a figure that is estimated to reach 2140.
Ethereum, apart from offering the possibilities of the other cryptocurrencies, has also proposed a concept that deals with smart contracts. These are programs that are validated through the blockchain system of this cryptocurrency.
Ethereum contracts are what, at this time, distinguishes this cryptocurrency from the others. These contracts, after all, are automated programs or processes. An example of these contracts can be from a small bet between friends to a mortgage or a bank loan. An example of smart contracts in your daily life could be:
Two friends want to bet 10 euros to see who wins the next game between Real Madrid and Barcelona. Until now, when making a bet, there were two options: (1) trust that the loser would give the 10 euros, or (2) give the money to a third friend who then distributes the money based on the result.
Well, the Smart Contract would consist of a program that, depending on the outcome of the match, it would make the transfer of the money automatically without the need for intermediaries. What he has lost, he can not refuse not to pay it, and the transfer of the 10 euros would be done even against his will.
Therefore,Ethereum’s contract possibilities are diverse and very secure due to its validation from the Blockchain system.
Altcoins or alternative currencies are any cryptocurrencies other than Bitcoin. The term originated to describe all those currencies that copy the Bitcoin source code. They generally use their own blockchains, but some use different verification systems, such as the proof of participation system, which we will not talk about due to low use. Some of the essential Altcoins are Ethereum, Dash, Litecoin, and Ripple, among others.
The legality of Cryptocurrencies:
The legal status of cryptocurrencies varies substantially from country to country and is not yet defined or changes in many of them. Although some countries have explicitly allowed their use and trade, others have banned or restricted them, such as China and Thailand, those who have banned public consumption from avoiding high capital losses. Similarly, several government agencies, departments, and courts have classified bitcoins differently. The Central Bank of China prohibited the handling of bitcoins by financial institutions in China in early 2014. In Russia, although cryptocurrencies are legal, it is illegal to buy goods with any currency other than the Russian ruble.
Cryptocurrencies are a potential tool to evade economic sanctions, for example, against Russia, Iran, or Venezuela. In April 2018, Russian and Iranian financial representatives met to discuss how to avoid the global “SWIFT” system through decentralized Blockchain technology. Russia also secretly supported Venezuela with the creation of petro, a national cryptocurrency initiated by the Maduro government to obtain valuable oil revenues, avoiding US sanctions.
Significant Risks in the Cryptocurrency Market:
By a wide margin, the most significant issue in the cryptocurrency market showcase is the unreasonable unpredictability. The costs of cryptographic forms of money on trade stages rise and fall drastically over a brief timeframe. At the point when a tradable resource can drop by as much as 49 percent in under 24 hours, at that point, the unpredictability of the market is high. There are various reasons that add to the unreasonable instability in the market; however, may be the most significant contributor is the exercises of “whales.”
Whales are people that have enormous cryptocurrency property. They can swing the market by controlling the cost of a cryptocurrency. They do this by methods for “buy and sell walls.” A buy wall is essentially when a “buy position” worth much money (most likely running into a great many dollars) is opened on the crypto exchanging stage. Customary financial specialists who trade modest quantities will see this enormous purchase position that has been opened and decipher it to mean a fast approaching cost increment. When this occurs, the cost of the cryptocurrency will unavoidably go up.
The issue with this consistently happening situation is that the whales can drive up the cost without really putting resources into the market. The real exchanges that have helped the value of the digital currency have originated from the littler dealers. At the point when the cost is at a level that favors the whales, they can modify their purchase and sell dividers, money in on the value spike, and once they do as such, the cost of the digital money falls significantly. This procedure gets rehashed again and again with just the whales profiting.
The most compelling motivation why this kind of benefit value control is conceivable is because of the absence of position value limits/charges on numerous digital money exchanging stages. On the off chance that sufficient cutoff points or expenses are set up, it will demoralize the development of enormous purchase and sell showcase positions.
Pump and Dump ICO Schemes
ICOs has risen to turn into a fundamental piece of the digital currency advertise. Numerous tokens are acquainted with the market utilizing ICOs with financial specialists purchasing these tokens in return for fiat cash. Siphon and dump ICO plans keep on being an issue for the market because of the absence of guidelines. During the ICO, the business visionaries behind the token estimate hugely on the coin, driving the costs up and getting financial specialists pulled in. When this is done, the money out, leaving the business specialists with useless coins that have practically zero worth.
The Activities of Cyber Criminals
The cryptocurrency market has directly from its beginning been plagued by the exercises of programmers and cybercriminals. There have been various prominent digital money hacks and heists that have brought about a great many dollars being taken. Dealers and speculators have lost assets, and a few stages have stopped working. In the fallout of these hacks, the cost of specific digital currencies has dropped extensively.
In an offer to counter the exercises of these cybercriminals, dealers and stage administrators need to take various prudent steps. While a portion of these measures is to be undoubtedly useful, they make bottlenecks that hamper the digital money exchanging process. This, at that point, makes an exchange off among security and effectiveness. Take, for example, the need to give adequate protection to cryptographic money held in wallet stockpiling. Because of the exercises of programmers, a few dealers like to store the more significant part of their digital money possessions in disconnected wallets. This implies that whenever they wish to exchange, they need to move from disconnected capacity to online capacity before taking an interest in the exchange. This establishes another issue in a previously tangled exchanging condition.
Transactions on a blockchain are permanent, and this way, if funds get stolen, there is minimal possibility of consistently recuperating such founds. Cryptocurrency exchanging stages continually need to improve their security system to remain in front of the programmers and criminals. A significant number of these updates likewise make the exchanging procedure much progressively awkward with all the confirmation steps that should be done.
Lack Of Price Uniformity
Cost graphing is a fundamental piece of asset/commodity. It is frequently essential to create value outlines to do venture investigation and create exchanging systems. The issue here is that the cost of a cryptocurrency can shift impressively on the diverse trade stages. With such extraordinary value contrasts for similar cryptographic money, cost outlining turns into a troublesome undertaking. Add to this, the sheer level of unpredictability in the market, and the issue turns out to be significantly more exacerbated.
The cryptocurrency market is tormented with a reiteration of deferrals across pretty much every kind of exchange. From opening an exchanging record to checking your personality and having the option to make stores and withdrawals, the framework is by all accounts very moderate. Blockchain innovation should cause exchanges to happen quicker; however, it appears to take everlastingly for transactions to be affirmed on the different chains.
Issues having to do with adaptability have been distinguished by specialists just like the reason for exchange delays. As the blockchains become longer, more exchanges are being held up in the line anticipating endorsement. The market is unstable, and in that capacity, postponements can be expensive. Merchants wind up, passing up ideal positions because the exchange didn’t get posted on the schedule.
These are only a portion of the pestering issues in the cryptocurrency market that take steps to influence the nature of the exchanging experience. Fundamentally, crucial partners in the market keep on taking a shot at endeavors to battle these issues. As the market develops and advances, it is trusted that a portion of these issues will turn into a relic of times gone by.
The Uses of Cryptocurrencies:
The current uses that cryptocurrencies have been very diverse. Through different cryptocurrencies, you can find various utilities. All of them can be used to make regular transactions, to make purchases in companies and businesses that accept this payment method, or to pay any kind of good.
Being a decentralized and anonymous payment system, many times they are given uses for the purchase of services and illegal goods such as the purchase and sale of weapons, drugs, etc. since buyers and sellers are under total anonymity.
Bitcoin’s Impact on Businesses:
Bitcoin was planned as a matter of first importance to encourage online payments, and it is as a payment system that I trust it will have its underlying critical effect on business. Regularly we depend on customary payment networks, for example, Visa, MasterCard, and Interac. Presently like never before, companies that need to be serious must use electronic payments in selling their products and enterprises. The utilization of checks and money has been inconsistent decrease for a long time while web-based business and electronic payments keep on developing quite a long time after year. As I would like to think, there are various qualities of bitcoin which offer enhancements over regular payment networks.
- It’s anything but difficult to partake in and use bitcoin. Regular installment systems depend on the banks as confided in outsiders to encourage the exchange of assets over those systems. You have to have a financial balance so as to partake. Setting up a financial balance, especially as a business, is regularly troublesome and assailed by the administration. On the off chance that you do have a ledger, you are then bound by decides and impediments that can smother development and groundbreaking. You can set up a bitcoin address very quickly – there’s no application or endorsement process. It costs you nothing, you can take part as an individual or as a business, you can do it from anyplace on the planet, and the main impediment for executing is what number of bitcoins you need to spend.
- Bitcoin is practical and adaptable. Maybe the coolest thing about bitcoin is that the payor (the individual sending the assets) can willfully set the exchange charge and can likewise decide to have no expense by any stretch of the imagination.
- It’s safe. It’s troublesome – edging on the domain of unimaginable – to de-misrepresentation the bitcoin arrange. Installment related extortion submitted over regular installment systems is a significant issue. The expense is a lot bigger on a worldwide scale, and it is caused by us all that take an interest as buyers and entrepreneurs. Ordinary installment systems were not initially intended to encourage electronic exchanges. Installment related extortion, especially internet business based installment misrepresentation, is generally simple to submit and there is almost no plan of action to those that endeavor it. Bitcoin doesn’t endure this issue.
These are all reasons that impact businesses both positively and negatively.
Hypothesis About the Future of Cryptocurrencies:
There has been much speculation about the future of Bitcoin in all areas, both legal and financial, or of practical application. What seems clear is that the use of Bitcoin by the general public and its introduction in the retail sector in the short term seems complicated by the technical difficulties that this would imply.
These are some of the causes that could cause the need to replace Bitcoin and other existing cryptocurrencies:
- Some of the big three of the Internet (Google, Amazon, or Apple) could enter with their own cryptocurrency or support some independent initiative, giving a significant boost to the new currency in operations of sale of products and services, and perhaps other utilities (operation financial).
- If Paypal, Mastercard, Visa, Amex, Western Union, or similar ones opt for a Bitcoin-like system to carry out their transactions, reduce costs and minimize friction, Bitcoin could be quickly moved to ordinary operations.
- Bitcoin could be displaced by some other cryptocurrency, for example, the confirmation time of transactions using Bitcoin is of the order of thirty minutes and is not suitable for real-time operations, while Quarkcoin has optimized this time below thirty seconds.
However, after several interviews with specialists and the study on its operation, we have concluded that cryptocurrencies, specifically the most used such as Bitcoin and Ethereum, to replace any physical currency such as the Euro or the Dollar, the verification capacity of blocks must be significantly higher, since the Blockchain can now validate up to 3 transactions per second while the current visa system can perform thousands.
The only way to increase transaction processing capacity is to increase block sizes, and this should be by consensus of the miners who are responsible for validating them. This has already been done, when a large group of miners reached an agreement through social networks, especially Telegram, where they decided to increase the size of each block to one MB, the current size.
Therefore, if the size of the blocks and the speed of validation of these does not increase, the implementation of cryptocurrencies to daily life will be practically impossible due to the low transaction processing capacity. However, the problem of block size could be compensated by expanding the network of nodes. This network is in continuous growth and, therefore, more and more transactions can be processed, and the validation time of these is being reduced, which suggests a more promising future for this type of currency.
I conclude that cryptocurrencies are here to stay either by business by the financial world, and by individuals although I am not convinced it will replace standard currencies. As with any new phenomena, regulations and legislation, this is both the job of governments and banks who must protect users and consumers from potential areas of fraud or corruption and I will be reading the business media very closely to follow this. For example, money laundering and terrorism are growing countries such as Australia, Canada and the Isle of Man have recently brought in laws to regulate this area, but it is going to need better international cooperation.