Most people who buy a home or a car, or buy things on Amazon, never consider “paying” with cryptocurrency. Most of us don’t have any clue how many cryptocurrencies there are (over 1,000), though a great deal of people have heard something about Bitcoin.
Cryptocurrency is a kind of electronic currency that is made to be protected and, oftentimes, anonymous. It is a form of money connected with the net which uses cryptography, the practice of converting legible data to a virtually uncrackable code, to automatically monitor transfers and purchases.
Cryptography was created from the need for protected communication in the Second World War. It has developed in the electronic age with components of mathematical theory and computer science to develop into a means to secure communications, money and information online.
Not many people understand the power cryptocurrency has, as it is simultaneously a currency, an investment and a technology. You can buy a house with cryptocurrency, speculate with a number of your retirement money in cryptocurrency (and eventually invest in cryptocurrency ETFs), and put money into cryptocurrency’s underlying blockchain technology.
Not surprisingly, banks tend to be more economical than politicians about cryptocurrency, and lots of individuals and start-ups are smarter than banks. The rise of cryptocurrency is roughly analogous to the growth of medical and recreational marijuana. How long can it take “official associations” such as banks, corporations and the government, to detect cryptocurrency opportunities and dangers? Their discovery journey is already well underway.
What do you have to know about cryptocurrency?
- Identify theft is essentially non-existent with cryptocurrency.
- It’s potentially nefarious: money laundering, among other trading, is easy.
- Authorities cannot control it, however, they can, and will, regulate and tax it (principally through investment tools).
- It’s available and immediate.
- An increasing number of businesses will accept it because they will have no choice.
- It is volatile: the value of Bitcoin and Ethereum, for example, have increased tremendously then dropped, over the last couple of years.
- It is enabled by a technology known as blockchain, which according to Portia Crowe provides an alternative to conventional transaction processing: Blockchains are ledgers (like Excel spreadsheets), however, they also accept inputs from lots of different parties. The ledger can simply be altered whenever there is a consensus among the group. That makes them more secure, and it means there is no need for a central authority to approve trades.
What do you need to do?
- Play with cryptocurrency: create your personal digital wallet. Experiment by converting some conventional money into Bitcoin, Ethereum, Litecoin or even Ripple, to see how it functions. Consider websites such as Coinbase to Begin. There are others.
- Track the investment instruments beyond individually buying/selling cryptocurrencies online. Exchange Traded Funds (ETFs) will arrive shortly, after a few hiccups with the US SEC. There are additional investment choices such as publicly traded capital, hedge funds and personal buy-and-hold funds, according to Kevin Gao. They all include chance and risk. (You should talk to investment professionals prior to risking meaningful money.)
- Assess your business’s desire for change, experimentation and alternative payment methods; monitor industry advancement in addition to the technical infrastructure required to expand the usage of cryptocurrency.
Why is it “here” and “frightening”?
It is here because it gives a safer, quicker and cheaper way to transact. It’s also here because natural growth will provoke enormous institutional curiosity and offerings. The payment incumbents will come about and proactively champion their cryptocurrency offerings. It’s inevitable because it’s anonymous and secretive.
Which gets us to “frightening.” Whenever an established process, in this case, payment systems, can be replaced by a different better/faster/cheaper one there are repercussions. Amazon’s continued attack on brick-and-mortar retail, Uber/Lyft alternatives to taxis, and Airbnb as replacements for hotels are only a couple of examples of how tumultuous choices can be, especially if they’re measurably better/faster/cheaper.