If you have invested at all, or you follow financial trends, tech trends, or even mainstream news, you have heard of bitcoin and cryptocurrency. What many don’t know is some of the basics of cryptocurrency and a little bit of its history. The first cryptocurrency was actually something called Digicash, created in 1989, but most people knew little about it.
However, by the time Bitcoin burst on the scene — a peer-to-peer system invented by Satoshi Nakamoto in 2008 and widely adopted by 2010 — people learned quickly about the decentralized currency. The Blockchain, the system the currency is based on, has expanded far beyond cryptocurrency into other potential applications.
Since cryptocurrency is decentralized and unregulated, the value continues to be volatile, and new coins are born and die almost weekly. So how will cryptocurrency continue to grow? Here are some potential answers.
An Industry in Flux
In the last year, many cryptocoins that were part of fundraising efforts called ICOs, or initial coin offerings are down, including bitcoin. Bitcoin is down more than 80 percent from its 2017 high, and 86 of ICOs from this year are trading below their initial offering value according to the Wall Street Journal. Nearly 30 percent of those ICOs have lost all of their value.
This has resulted in layoffs from some firms like ConsenSys, which acts as a development house for startups who want to take advantage of the Ethereum platform by building services. They, like other startups, are starting to realize that they are going to have to act as a lean business if they are going to survive. In fact, the companies in the industry that are doing the best are ones who converted much of their gains from an ICO to flat currency.
Is this bad news for the future of crypto? Not entirely. The problem so far is the volatility is tied to consumer confidence. A part of this is that the blockchain and cryptocurrencies have been tied to ideas, not to concrete products that actually touch consumers. These are coming rapidly, and there is no doubt about the continued impact of cryptocurrency on emerging markets.
In addition to products, service is also important. People who have no access to banks can use cryptocurrency wallets to retain and exchange value. Sending money across borders is also easier, and for those who are sending money back to their home country while working in another, cryptocurrency is a great solution, even if the recipient turns the coins into flat cash almost immediately. Many startups like BitPesa are taking advantage of this emerging market as well.
Besides emerging markets, several legitimate businesses are taking cryptocurrency as payment for their products and services. A new partnership means that Australians can even pay utility bills using cryptocurrency.
All of this means that growth is ahead, but real products, a lean business model, and a mix of flat currency investments, ICO and other cryptocurrencies is the way for companies to ensure stability moving forward.
The Power of the Blockchain
The blockchain, the ledger system on which cryptocurrency is base, has piqued the interest of several industries. Why? Well, once a “block” is created, it cannot be altered. The blockchain is transparent, and the transactions are contained in ledgers on the computers of those who are party to it. This has a number of interesting potential applications.
Record Keeping: The immutable nature of blocks means that for the purpose of record keeping, even the security of records, the blockchain could be one of the greatest innovations yet. Security is still a concern for personal identifying information, but many companies are working to solve that issue.
Supply Chain Management: Want to know where things are going and where things might have gone wrong in the delivery of goods. The application of blockchain to supply chain management is a growing segment for startups.
Insurance and Claims Processing: The potential for errors in the use of manual and even online forms in insurance claim management is huge. Using the blockchain, the ultimate in risk-free management, encryption, and transparency can be achieved.
Smart Contracts: One place the blockchain is already having an undeniable impact is contracts. An agreement, set up with solid milestones that are immutable, protects both parties without the need for litigation or other legal action.
These are only a few of the ways the blockchain is already impacting the way we do business and our everyday lives. Soon things like your smartphone, how you store things on the cloud, and even self-driving cars will be tied to blockchain technology.
What does this mean to the future of cryptocurrency? Coins tied to these physical products or services will be more stable once they become industry standards. The coins will likely act kind of like stocks for the companies who issue them, but they won’t be as directly tied to profits nor will they be centralized. Instead, they will be tradeable and usable currency themselves. These types of relationships will continue to grow, and as it stabilizes, cryptocurrency will be even more accepted as a direct form of payment without conversion to flat money.
Bitcoin Dominance and the Future
So far, bitcoin continues to dominate the cryptocurrency market. Even then, people are not quite sure what to do with it. Since it is a virtual currency that can also be held as a digital asset, even the IRS is not sure how it fits in with the tax code. So far, it is being treated like property, and any gains or losses follow the capital gains tax.
While bitcoin has gained back some of its value back after the biggest fall of the year, other currencies are either stable or have suffered losses. Where do things go from here for the first modern cryptocurrency?
Some economists say that the future of bitcoin is more like a lottery ticket than an investment, and its value is more likely to be around $100 rather than $100K. Others are more optimistic despite a poor showing this year, and let’s not forget that the “experts” have been wrong about bitcoin before.
How will cryptocurrency continue to grow? Rising industries will determine that, along with the number of people who adopt the currency over time. The one thing that is certain is the cryptocurrency of the future will be more stable and a much more viable investment.