A cryptocurrency is a digital currency that is created and managed through the use of advanced cryptographic techniques known as cryptography. Cryptocurrency made the leap from being an academic concept to (hypothetical) reality with the creation of Bitcoin in 2009. While Bitcoin attracted an increasing number of followers in subsequent years, it captured significant interest from investors and the media in April 2013 when it peaked at a record high of 266. Dollars for each bitcoin after rising 10-fold in the previous two months. Bitcoin's market value reached over $ 2 billion at its peak, but the 50% drop soon thereafter sparked a heated debate about the future of cryptocurrencies in general and Bitcoin in particular. So, will these alternative currencies eventually replace traditional currencies and become ubiquitous like the dollar and the euro someday? Or is cryptocurrencies a passing fad that will ignite after a long time? The answer lies in Bitcoin.

The future of cryptocurrencies

Some economic analysts expect a major change in cryptocurrencies as corporate money enters the market. Moreover, there is a possibility that cryptocurrencies will float on the Nasdaq exchange, which will add more credibility to the blockchain and its uses as an alternative to traditional currencies. Some speculate that all crypto needs is a verified exchange-traded fund (ETF). The ETF will certainly make it easier for people to invest in Bitcoin, but there is still a demand for the desire to invest in cryptocurrencies, which may not be created automatically with a fund.

Understanding Bitcoin

Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables the network to perform all functions such as currency issuance, transaction processing, and verification. While this decentralization makes Bitcoin free from manipulation or government interference, the flip side is that there is no central authority to ensure that things run smoothly or to support Bitcoin's value. Bitcoins are created digitally through a "mining" process that requires powerful computers to solve complex algorithms and number processing. It is currently being generated at a rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, the level expected to be reached in the year 2140.

These characteristics make Bitcoin fundamentally different from fiat currency, backed by full faith and credit from its government. Issuing paper currencies is a highly centralized activity supervised by the central bank of the state. While a bank regulates the amount of currency issued according to its monetary policy objectives, in theory there is no upper limit to the amount of that currency issuance. Additionally, deposits in local currency are generally insured against bank failures by a government body. On the other hand, Bitcoin has no such support mechanisms. Bitcoin's value depends entirely on what investors are willing to pay for at a given time. Additionally, if the Bitcoin exchange collapsed, clients with Bitcoin balances would have no way of getting them back.

Author: Coincartz Expert Trading platform