Cryptocurrencies are digital assets that do not have physical forms. They are based on blockchain technology and follow a decentralized network. They rely on decentralized and distributed ledgers for their existence. Cryptocurrencies are immutable as they use cryptographic methods to protect the data.
One of the most important characteristic features of cryptocurrencies is that they are not governed by any central authority or financial institutions. The owners of the cryptocurrencies will be completely responsible for the assets they hold. However, many external events like socio-economic and political events can influence the prices of cryptocurrencies.
One of the most important questions that people ask about cryptocurrencies is what will be their future? Before we move to it, let us first consider the benefits of cryptocurrencies.
- Crypto transactions are effortless because the transfer takes place directly, without the involvement of any third parties.
- Systems like Proof-of-Stake and Proof-of-Work along with private and public keys are available to ensure the safety of the transactions.
- There is only a minimal processing fee for the transactions, while banks and other institutions charge huge fees for their wire transfers.
- Cryptocurrencies have a fixed value when launched. So their price will not be affected during times of inflation. As they are available only in a limited quantity, the rise in demand may increase their value.
- As cryptocurrencies are decentralized, no authority or individual has a monopoly over them. Thus, its value or flow is not restricted by any organizations or individuals, which makes it more stable and protected.
Now let’s also look at some of the cons of cryptocurrencies.
- There is a semi-anonymity in the transactions, which affects the transparency offered by cryptocurrencies and such transactions are hard to track.
- The decentralized nature of cryptocurrencies avoids any regulation from higher authorities. So the market is extremely volatile.
- As it does not have an asset value or underlying value such as derivatives, it is difficult to control the volatility of cryptocurrencies. Therefore, it is difficult for stakeholders and investors to invest in cryptocurrencies.
- Scalability is another problem faced by cryptocurrencies. So adopting cryptocurrencies may cause disruptions in a country’s monetary systems.
As we have discussed now, there are both benefits and issues when it comes to adopting cryptocurrencies. Many regulatory bodies are working to eliminate the risk factor involved in the trading and investment of cryptocurrencies. Many experts suggest that digital currencies will become a need in the future, however, they must have proper guidelines and norms. Some countries have passed legislation regarding cryptocurrencies to improve regulation and reduce taxes.
The technology brought by cryptocurrency, blockchain technology, is being widely promoted in several countries. As some companies have started accepting crypto payments, the need for market growth has risen. The safety and protection offered by blockchain technology attracts many industries. It is expected to emerge as one of the hot-selling technologies in the world in the coming years. There are also huge expectations for the rise of the value of Bitcoin. It is forecasted that within some years, the commodity market will completely transform into a digital state.