Cryptocurrency was conceived as an alternative to traditional money. It was created as a new way to store value and break free from central banks and major financial institutions in the wake of the 2008 financial crisis. For now, the market for Bitcoin and altcoins is driven by speculation while the underlying blockchain technology and the cryptosphere in general matures. The technology promises to bring many benefits; but, crypto and blockchain, like any budding idea, could also face some turbulence. While the world awaits mass adoption, here’s what you need to know about cryptocurrency:
The most important and obvious characteristic that cryptocurrency possesses which will lead to its widespread use is that it makes transactions cheaper and more efficient. Overstock.com board member and former Chairman, Jonathan Johnson recently stated that crypto does indeed make doing business easier.
“We pay a processing fee for credit cards, and we employ about 40 people in our fraud department. That’s a cost of doing business with credit cards. When we take cryptocurrency, we have a very small transaction fee with Coinbase, much smaller than our credit card processing fee, and we have no fraud prevention department. It’s like a cash transaction. For us, that is a much cheaper way of doing business.”
Aside from making businesses run smoother, the peer-to-peer nature will simplify spending for consumers and make sharing money between family or friends seamless even if they are on opposite sides of the world. Decentralization and the blockchain can deliver both privacy to users and transparent transactions adding to the list of advantages of cryptocurrencies. The anonymity of Bitcoin and other cryptocurrencies together with the fact that fake transactions can’t be confirmed to a block gives users something they know will be secure.
Unfortunately, crime surrounds the cryptocurrency world and originates within the crypto sector itself. Bitcoin and altcoins have been known to be used to aid in crimes such as money laundering and the dealing of contraband goods and services. The anonymous nature will obviously attract those who wish to remain away from the light and the eyes of the law and like crypto itself, crypto law enforcement is still in its infancy as well.
ICO scams have also been prevalent. Fake startups with no intention of ever producing a coin have even run off with investors’ money. Another problem the crypto world faces is the questionable security of exchanges. Within the last year, several cryptocurrency exchanges have been hacked. The Japanese exchange Coincheck lost more than $500 million in January displaying a weakness in the way exchanges work and in turn hurt the markets. By storing coins in a centralized, company contained way, hackers have a bull’s eye to go after. Bithemoth plans to counter this by integrating hardware wallets into their exchange to keep coins in cold storage and not in a big pool for hackers to target.
The unsavory side of crypto includes stuff like social media scams baiting naive investors into sending tokens or coins to their address with promises of great returns, bots spamming for non trustworthy exchanges, and fraudsters posing as industry leaders. The space also includes a lot of shilling and pumping of tokens with no real usable functions or features with traders trying to make millions overnight.
For now crypto may have to deal with these bumps in the road, but the future promises to be great for cryptocurrency and blockchain technology as regulations become more clear and users become more confident.
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