The economic landscape has shifted as a result of globalization and technological advances. The way we work, play, communicate and do business is all different now than it was 10 or 20 years ago. And because of this shift in our society’s norms (and changes in technology), there are new ways to think about and move money.
At its heart, money is a way of tracking what we value most in society—it gives us an easy way to pay for labor and goods with something that is universally valued.
If you ask an ardent supporter, “is cryptocurrency the future?”, they’ll say “yes” without a moment’s hesitation.
Why? Because they believe that the future of cryptocurrency will be one of fundamental change to our traditional monetary system as we know it. It has the unique ability to change how we pay, borrow and lend money.
Table of Contents
- 1 What is cryptocurrency?
- 2 How it started
- 3 Growth and adoption
- 4 How it’s going
- 5 Is cryptocurrency the future of money?
- 6 Scalability
- 7 Consider the risks
What is cryptocurrency?
Cryptocurrency is a term used for digital currencies that use cryptography for security purposes. Unlike other forms of digital transactions which usually rely on a centralized authority figure, cryptocurrencies do not require any intermediary party.
Cryptography is the art of protecting information and making sure only the intended recipient can read or process it. Cryptocurrencies, like other currencies are a medium for exchange that utilize coded interfaces to record transactions: cryptocurrencies are in simple terms, digital currency secured by cryptography.
The future of cryptocurrency looks bright. Now that they’ve become more mainstream, their use is becoming ubiquitous in all aspects of life and this will only continue to increase over time.
They typically rely on Secure Hash Algorithm SHA256 encryption techniques combined with public key cryptography and blockchain technology. This removes the need of expensive infrastructure because all your assets will be stored safely online where (in theory) nobody but you has access.
Cryptocurrencies are designed to work as decentralized, peer-to-peer money. Transactions happen when you’re trading on the internet with other people or businesses. It’s decentralized, meaning there isn’t one governing authority like banks or governments that oversee it.
How it started
Bitcoin, the first popularized decentralized digital currency, was created by a person or group of people under the name Satoshi Nakamoto. Bitcoin uses SHA-256 as its proof-of-work function. In 2009 (the year after it was founded), mining began and would continue to be widely used until 2011 when bitcoin mining became more competitive with GPU and ASIC hardware.
It is estimated that worldwide mining accounts for over 110,000 terawatt hours of electricity per year (roughly equivalent to the annual energy draw of small countries like Argentina, Malaysia or Sweden).
Blockchain technology underpins its operation which uses computer algorithms encoded in blocks to confirm transactions on the ledger with new transactions being added onto it every 10 minutes; hence why they call them “blocks” (think LEGO bricks).
Cryptocurrency has skyrocketed in popularity over recent years with intense interest shown by investors all around the globe. The potential for cryptocurrencies to revolutionize our economy in innovative ways that were unimaginable just decades ago is real and already underway.
The altcoin market is in a state of flux. There are currently over 1800 different coins with new ones coming out every day, but it’s unlikely that the majority will have a place in the future of cryptocurrency. Most people see this as an opportunity though to invest in altcoins that have true utility and can be used for something more than just trading or speculation.
There are plenty who have found their niche; already providing alternatives to managing living expenses, paying bills and even acting as loans on exchanges where you pay back your interest later at whatever rate suits both parties involved in said transaction.
Growth and adoption
The growth of blockchain technology is being driven by innovative developers who are finding new applications for it all the time. It’s still early days and its potential use cases have yet to be realized, but there’s a lot of promise in blockchain due to how secure , transparent and decentralized they make systems.
There are already many exciting projects in the pipeline, including several potential game-changers. We’re going to take a look now at some of them and see what they have to offer.
Ethereum (ETH) – The smart contract blockchain
The Ethereum network is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property. This enables developers to create markets, store registries of debts or promises, move funds in accordance with instructions given long in the past (like a will or a futures contract) and many other things that have not been invented yet, all without a middle man or counterparty risk.
Thanks to Ethereum’s well-built technology platform, other developers can easily create their own cryptocurrencies as well. You could almost say that Ethereum is a key building block in the future of cryptocurrency.
Dogecoin (DOGE) – the joke that keeps on giving
Dogecoin is a cryptocurrency featuring a likeness of the Shiba Inu dog from the “Doge” Internet meme as its logo. Introduced as a “joke currency” on 6 December 2013, Dogecoin quickly developed its own online community and reached a capitalization of US$60 million in January 2014.
Transactions are made with minimal processing fees, though tips are given to nodes that forward transactions onto the network. The Dogecoin network is secured by users who help validate transactions by adding them to a decentralized and public ledger which is updated and archived periodically using peer-to-peer file sharing technology.
Litecoin (LTC) – the silver to Bitcoin’s gold
In addition to these, we have Litecoin which was created by ex-Google employee Charlie Lee. He wanted to improve upon the original Bitcoin design which he saw as flawed primarily due to its lack of speed. And so, Litecoin was born.
Litecoin is capable of handling higher transaction volume than its counterpart – Bitcoin. This is due to its faster block generation rate and improved storage efficiency. Another major difference between Litecoin and Bitcoin is the hashing algorithm, which enables a greater number of coins to be created and also makes mining easier.
How it’s going
As society evolves, it is no surprise that the way we move money has changed.
After the success of Bitcoin, many different peer-to-peer currencies emerged in an attempt to replicate the success and become the ultimate future of cryptocurrency.
Altcoins and other types of cryptocurrency can perform different functions besides being used strictly as money – they’re part investment vehicle or commodity depending on factors including what type of coin you get involved with. Altcoins take many forms: some focus on privacy and security while others are equipped for more specialized functionality.
When it comes to remittance of funds for example, the banks haven’t been able to keep up with the demand for quicker and cheaper transactions. The blockchain technology that facilitates crypto transactions enables the processing of both international payments and domestic transfers much faster than any other financial system in existence today.
You can now send payments to anyone in the world within minutes thanks to blockchain technology. This means it’s much quicker for money to be transferred around the globe, and this is a huge benefit particularly for expats who face challenges sending and receiving money internationally.
Countries around the world are even starting to establish their own cryptocurrencies, which combine the efficiency of crypto with security from traditional banking methods like banks. In fact, the banks are now creating their own cryptocurrencies—called CBDCs (Central Bank Digital Currencies) and are now set to compete with the likes of Ether and Bitcoin. The future of cryptocurrency is going to get interesting as we enter 2022.
Whilst government-issued cryptocurrencies are well underway, it is our belief that cryptocurrencies will continue to grow and thrive in popularity within the global digital community. From transferring funds across borders more easily to tokenizing art, music and other forms of intellectual property, the uses cases for cryptocurrencies are limitless.
Is cryptocurrency the future of money?
There is an increasing number of people who believe this may well be the case – but there will also always be forward thinkers that believe otherwise.
It’s easy to ignore the cryptocurrencies of today, and think that they won’t be around in 5 years’ time – it’s been said before with other forms of money such as gold or silver. Time has proved how wrong people were about these ideas, but there is no reason why history should repeat itself.
Though the market can be volatile, we expect that the future of cryptocurrency will be one of global acceptance. For example, you can already buy just about anything with Bitcoin, from a pizza to motor vehicles to house and even pay for your education in crypto.
And while Bitcoin has definitely made headlines recently regarding the way it is used on illegal websites (one of them being The Silk Road), it’s also being used in novel ways. Recently, Microsoft added Bitcoin to their payment policy, enabling customers to make purchases in Bitcoin. This integration with a public corporation is one of the first major steps for cryptocurrency to become more mainstream.
Hundreds of other companies already accept cryptocurrency as a payment method, including big software providers like ExpressVPN and even Tesla for a short period (but they’ll start accepting it again soon)
Some governments are also starting to recognize it as a legal currency and several countries have formed their own working groups on cryptocurrencies. However, a few countries want to ban Bitcoin, but that’s mostly hot air at this point.
Overall, it seems like the future of cryptocurrency is only limited by our imagination, with more uses being found every day.
The boom in cryptocurrency this year has created a new class of very wealthy people and given some existing billionaires — including Chris Larsen, the co-founder of Ripple, which provides blockchain technology for financial institutions — a whopping paper profit.
The total value of all cryptocurrencies is $2.08 trillion as of this writing, and despite many high profile upsets there are plenty more successes.
Scalability in cryptocurrencies is one of their most important features because the more scalability, or transactions that can be processed per unit time, the greater their rate of growth. Scalability entails a system which not only has the ability to grow with demands but also meets them.
One project seeking this level of scalability for cryptocurrency systems is Ethereum 2.0, a protocol that was launched in 2021 and revolutionized the world of altcoins.
While it was Ethereum 2.0 that sparked a Bitcoin vs Altcoins debate, it is actually Bitcoin which still dominates the market – despite recent faults in Bitcoin’s network, such as transaction congestion causing slow processing of transactions. This has led to an increase in the value and appreciation of other cryptocurrencies like Ether or XRP.
With Ethereum 2’s speed, scalability and widespread use as a payment network, it has become the most practical blockchain to date and most accurately represents the future of cryptocurrency.
Consider the risks
Everything has a dark side. There are very real risks when using or holding cryptocurrency, and some of them we touched upon in this article.
The first is that it’s not backed by any central bank; instead it runs on the blockchain system which is more similar to gold than fiat currency. You’re essentially trusting people on the other side of a network to send you bitcoin for your hard earned fiat cash, and if they don’t show up there is no one to make them do so.
The second risk is in computer security: every time you enter your private wallet password(s) into an online app or website you are exposing your keys to hackers. If the password is weak and an exploit takes place, all of your cryptocurrency can be stolen in less than a minute; then there’s no one to get it back for you.
Finally, if anyone figures out how to hack the blockchain itself there could be a massive loss of funds while the code is updated. If this ever happened it would likely spell “game over” for bitcoin and most other cryptocurrencies, however there are plenty of experts working on ways to keep things safe. For all of these reasons, even cryptocurrency enthusiasts don’t recommend investing more than you can afford to lose.
Of course, there could come a day when blockchain transactions are the new norm — staying ahead of this new technology could be worth every penny if cryptocurrency is the future of money.