What is a cryptocurrency? A digital or virtual currency that uses cryptography for security, difficult to counterfeit because of this security feature. “A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation,” writes www.investopedia.com. The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. As of September 2015, there were over 14.6 million bitcoins in circulation with a total market value of $3.4 billion. Bitcoin’s success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin and PPCoin.
Since Bitcoin’s appearance in 2009, hundreds of new cryptocurrencies (often called altcoins) have been created, all of which offer different advantages and disadvantages compared to Bitcoin. The Blockchain itself is based on the principles of cryptography, hence the name “cryptocurrencies”.
According to Forbes, “the values of major cryptocurrencies, especially Bitcoin, Ethereum, and Ripple skyrocketed so high that those who had invested in them earlier felt on top of the world and those who hadn’t felt that they had missed out. On December 17, 2017, the value of Bitcoin had risen to an all-time high ($19,850) as had several other major cryptocurrencies. Several warnings were given as to why people should avoid investing in cryptocurrencies on the premise of the volatile nature of the market”.
Moreover, “2018 has not been a good year for the market so far. Having reached a valuation of $834 billion as of January 7, 2018, CoinMarketCap reported that the market witnessed a drastic plunge of about 66%, losing over $553 billion. Bitcoin recorded a huge loss of over 50% in February, with valuation dropping below $7,000. Ethereum and Ripple also suffered similar drops, both recording losses of over 40% during the same month,” wrote Kenny Au for Forbes.
As The Guardian pointed out, economists had warned that the Bitcoin bubble had burst and worse was to follow. In South Korea, which accounts for up to 15% of daily Bitcoin trading, the chief financial regulator chief told MPs in Seoul on Thursday that the government was considering shutting down all local virtual currency exchanges, days after the idea was raised by the country’s justice minister. Moreover, The Russian and Chinese governments pointed to the same idea. In February 2018, the Bank of Austria reduced the value of Bitcoin to “pure speculation.” Such hard-hitting statements from numerous sources sent cryptocurrency investors — especially the new ones — into a frenzy, which is believed to have contributed to the downturn.
Moreover, according to the Verge, in February, Bank of America, JP Morgan Chase and Citigroup each confirmed to Bloomberg that they were halting transactions involving digital currency with their credit cards, although Bank of America spokeswoman Betty Riess said that customers can still use their debit cards. Capital One and Discover have previously said that they won’t allow their cards to be used for cryptocurrency transactions. Bloomberg also noted that digital currencies can be a problem for lenders if customers can’t repay loans, or if stolen cards are used to purchase the untraceable currency. Cryptocurrencies can also be difficult for banks to monitor, which are required to look out for signs of money laundering.
Still, according to Decentralize Today, here are some advantages of the cryptocurrency:
- Fraud: Cryptocurerncies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs.
- Identity Theft: When you give your credit card to a merchant, you give him or her access to your full credit line, even if the transaction is for a small amount. Credit cards operate on a “pull” basis, where the store initiates the payment and pulls the designated amount from your account. Cryptocurrency use a “push” mechanism that allows the cryptocurrency holder to send exactly what he or she wants to the merchant or recipient with no further information
- Access to Everyone: There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchange systems. These individuals are primed for the Crytocurrency market. Kenya’s M-PESA system, a mobile phone-based money transfer and micros financing service recently announced a bitcoin device, with one in three Kenyans now owning a bitcoin wallet.
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