Key insights in the world of Cryptocurrencies
With companies infusing technology at the core of their business processes, the world is changing like never before. The transportation industry has already embraced the concept of a shared economy, video streaming platforms have gained massive traction, top global brands have resorted to new-generation influencers. Ordinary consumer behaviors – how we eat, commute, interact – all have gone through massive paradigm shifts. Even the transaction of money is not an exception to what is becoming the rule.
For centuries we have resorted to the concept of trading banknotes and coins in exchange for goods and services. But with technology constantly becoming more mobile and the world rapidly converging to become one, single economy – the emergence of a cashless economy has now become a dire need. And that is where cryptocurrency comes in.
A cryptocurrency is digital money that operates with the help of blockchain technology. Any transaction that a user does via cryptocurrency gets encrypted by a decentralized ledger (i.e. the blockchain) – reducing probabilities of any fraud and money laundering. Thus with reliability and ease of use being its core propositions, cryptocurrencies can be easily transferred from one user to another without involving intermediaries like banks.
On 31st October 2008, Satoshi Nakamoto, a pseudonym used by either a group of people or an individual (the mystery remains unsolved till today) published the white paper named Bitcoin: A Peer-to-Peer Electronic Cash System to explain the functionality of the Bitcoin blockchain network. And that was only the beginning. Fast forward a few years, Bitcoin has become the most widely used cryptocurrency on the planet, with Etherium joining the race in 2015.
Here are the biggest 5 must-know trends about Cryptocurrencies:
CRYPTOCURRENCIES GOING PUBLIC
Similar to big corporations, cryptocurrencies have their own version of initial public offerings. Termed as ICOs (Initial Coin Offerings), it allows firms to raise cash from investors in order to develop new blockchain and cryptocurrency technologies. Issuing coins to investors instead of giving away company share is the key difference between an IPO and an ICO. In exchange for investing in these cryptocurrency startups, the investors get early access to these game-changing technologies as per their needs. A study claims that cryptocurrency-related projects have raised more than $1.6 billion via ICOs to date, while venture capitalists have provided only $550 million for cryptocurrency companies across more than 120 deals.
RIPPLE CREATING WAVES ACROSS THE CRYPTO SPACE
With Bitcoin dominating the entire portfolio of digital currencies, Ripple has now emerged as the new high-flyer. This promising underdog turned chief contender is set to experience the most growth due to its unique feature. Unlike other cryptocurrencies, Ripple allows a user to connect with financial institutions (with the likes of Amex, MoneyGram, Western Union) by which they can then exchange their assets into other financial instruments. As a result, the company is likely to witness further growth due to its operations across 100 countries with nearly 200 corporate partnerships.
DEMAND FOR SECURITY TOKEN OFFERINGS INCREASE
Despite all the seemingly endless potential that cryptocurrencies possess, veteran investors often shy away from investing in these startups due to the absence of proper security of their funds. As a result, capital raised by ICOs has lately begun to fall. On the contrary, Security Token Offerings (STOs) have started to gain traction as a measure of ensuring security in the holistic investing process. STOs are quite similar to ICOs, but has a few key differences – STOs are regulated by the Securities and Exchanges Commission (SEC) in the U.S. while ICOs are not monitored by any authority of power. And the best feature of STOs is that they are backed by financial assets like company stocks, shares and other commodities – a contingency plan which ICOs clearly do not offer.
CENTRAL BANKS ARE SPECULATED TO ISSUE DIGITAL CURRENCIES
As per a FinTech report by the International Monetary Fund, it is speculated that Central Banks are likely to offer digital currencies in the near future. Apparently, a number of central banks have reportedly been conducting research on Central Bank Digital Currency’s impact on financial stability, the structure of the banking sector, entry of non-bank financial institutions, and monetary policy transmission.
FACEBOOK IS THE NEW ENTRANT IN THE CRYPTO-ECONOMY
The biggest surprise came in 2019 when social media giant Facebook announced its plans of venturing into this industry with its own cryptocurrency named Libra; which will enable users to buy things or send money to people with almost zero fees. Users can easily cash out their Libra online or at local exchange points. For further convenience and for a much more integrated experience, this digital currency’s wallet (better known as Calibra wallet) will be built into Whatsapp, Messenger and the platform of Facebook itself. Moreover, Facebook even built an alliance along with several other companies in order to enhance the newly introduced currency’s credibility and to add more technical prowess behind its framework. Known as The Libra Association – each founding member has to pay a minimum of $10 million to join the alliance and gain one vote in the Libra Association Council and be entitled a share of the dividends from interest earned on the Libra reserve. Esteemed companies like PayPal, Uber, Vodafone, Lyft and 23 others have joined alongside Facebook to make Calibra a reliable cryptocurrency in the days to come. While the invasion of privacy can still be deemed as a real threat, Facebook plans to pledge that none of the transaction data will be shared back to Facebook; as a result, the platform won’t be targeting you based on your Calibra reserve. But you can surely expect to see new offers and features being introduced on other digital platforms, e.g. Amazon or Spotify giving you a discount for paying in Libra; or maybe free tokens for completing 100 Libra transactions and so on.
In short, whether it’s Libra, Bitcoin or any other cryptocurrency – one thing is for certain – there is about to be a massive change in how we pay for the everyday transactions in our lives. Money and coins have replaced the barter trade systems and it is only about time cryptocurrencies replaces banknotes and coins; while leather wallets shall be replaced by a single app in our smartphone. The future is indeed here!