Trading on cryptocurrencies is fast becoming a popular way to make money. From being an academic concept with the creation of Bitcoin in 2009, it has grown by leaps and bounds. It, however, gained media attention in April 2013 after reaching a record $266 per Bitcoin. A cryptocurrency is a digital currency that was developed and managed using an advanced encryption technique called cryptography. In this article, we shall look at what the future holds as far as cryptocurrency is concerned.
Bitcoin – the Current Standard
Bitcoin is a decentralized currency utilizing peer-to-peer technology allowing functions such as currency issuance, processing and verifying transactions for collective implementation by the network. According to Robert Peter Janitzek, Bitcoin is free from manipulation or interference by the government. The disadvantage of this is that there will be no central authority that will make sure that everything runs smoothly or will back the value of Bitcoin.
This is one of the fundamental differences between Bitcoin and fiat currency, which has the backing and credit of its government. The issuance of fiat currencies are highly centralized according to the government’s monetary policy objectives.
Due to its highly decentralized nature, Bitcoins have also been a platform for doing various illegal activities such as money laundering, drug peddling, smuggling, and weapons procurement. Robert Janitzek reveals that cryptocurrency has been the focus of powerful regulatory and other government agencies such as Financial Crimes Enforcement Network (FinCEN), SEC, FBI, and Department of Homeland Security (DHS). Recently, DHS froze the account of Mt. Gox, the largest Bitcoin exchange.
Despite some issues, the Bitcoin continues to grow in terms of popularity and as a money making platform. A number of companies have released alternative cryptocurrencies, which includes the following:
• Litecoin – At the moment, Litecoin is considered as Bitcoin’s main rival. Founded in 2011, it is designed for processing smaller transactions faster. Litecoin can be mined through a normal desktop computer. It has a maximum limit for cryptocurrency trading at 84 million, four times that of Bitcoin’s. It also has a quicker processing time at 2.5 minutes.
• Ripple –Founded in 2012 by tech entrepreneur Chris Larsen, Ripple is both a currency and payment system. The currency component is XRP, which also has a mathematical foundation. The system of Ripple allows the transfer of funds in any currency to another Ripple user in a span of seconds.
• MintChip – What makes MintChip different from other cryptocurrencies is that it was created by a government institution, the Royal Canadian Mint. It is a smartcard that has electronic value and can securely transfer it from one chip to another. It is also backed by a physical currency, the Canadian dollar.