The Future of Digital Currencies & Bitcoin
What is a digital currency?
There are 2 types of technologies used for digital currencies.
- Virtual Currency: A type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community.
- Cryptocurrency: A type of digital token that relies on cryptography for chaining together digital signatures of token transfers, peer-to-peer networking and decentralization.
There are currently over 740 types of cryptocurrencies, but only 24-26 of them had market capitalization has over $10 million.
Check out Crypto-Currency Market Capitalizations for real time market information.
What are Bitcoins?
Perhaps the most well known crypto-currency on the market, Bitcoin is like digital gold. There is a finite supply that can be ‘mined’ every year using sophisticated software. This is called blockchain technology, we'll go into more detail about blockchain in a future post.
Now if you are interested in investing in Bitcoins or digital currencies, this probably isn't the post for you. What we plan on explaining to you is the societal implications of such technology being implemented at scale.
Why the Hype?
Because digital currencies are a decentralized system. Governments would lose control over the economy. This would mean:
- A more authentic version of a "Free Market". The currencies exchange at the rate of the market with no intervention.
- While may of your other online activities generate a digital footprint, bitcoin is secure and private. You can remain anonymous while using it.
- Value not pegged to any country, which means more if you live in places like Venezuela where the local currency is even more volatile.
The Risks of Decentralized Currencies:
- No one overseeing the valuation, which makes it extremely volatile to fluctuating.
- Money laundering. Especially overseas to other countries without interacting with government regulation.
- Creators of digital currencies not subject to comply to the financial institution. Which in itself isn't bad, just means that they can create their own rules.
- Lack of regulation. Like the previous point, no one is overseeing this process.
Should I Invest in Bitcoin?
Unless you have a lot of money to blow and are a risk seeker, you should probably stick to a safer investment portfolio. Maybe buy a few if you want to try it out, but it's definitely still considered a grey zone in the financial world.
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