Cryptocurrencies: Past, Present, and Future!

Cryptocurrencies| 22nd December 2021 | Virtual Wire

 

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Cryptocurrencies are a form of digital currency, which can be used as a medium of exchange.

They use cryptography to secure their transactions and control the creation of new units. They work on blockchain technology, meaning that they are decentralized and not issued by any central authority. All transactions are recorded on a public ledger or blockchain.


Past: How it started!

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The first recorded use of what we now know as Bitcoin took place on October 31, 2008. It was a contribution to a discussion thread entitled "A new electronic cash system that's fully peer-to-peer". The author said: "I've been working on a new form of electronic cash along the same lines as Bitcoin but I want it to be much more than just another virtual currency." He explained that such an e-currency would offer "lower transaction fees and less fraud potential". That might sound like the olden days but it was not so long ago! And this is not all, cryptocurrencies have been steadily evolving ever since.


The first Bitcoin transaction for goods and services took place in 2010 and was worth $10. It was a pizza worth 10,000 Bitcoins. A year later it became possible to send money using cryptocurrencies. In 2012, the number of Bitcoin transactions surpassed those for physical cash. In 2013, the value of all cryptocurrencies grew by over 2,600%, from $17 billion to $600 billion. In 2014, the value of Bitcoin rose by 40% and at its peak, in January 2015 it reached a record high worth over $1000 per coin. By February 2017, its price had fallen to below $600.


In April 2013, while Bitcoin users were celebrating its success, something peculiar was taking place behind the scenes: MtGox (Magic The Gathering Online Exchange), the leading Bitcoin exchange at the time, inexplicably lost nearly 750,000 Bitcoins which were worth $350 million at that moment. Six years later another cryptocurrency exchange called Coincheck announced that it has been hacked and nearly $500 million worth of cryptocurrencies (mostly NEM) had been stolen from its accounts.


Present: Where we are now!

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Cryptocurrency is a relatively recent invention that has been growing in popularity over the last few years because of its decentralized nature and potential for easy transfer across national borders. Today the cryptocurrency market has the largest share in global wealth compared to any other asset class. At its peak, there were over 800 cryptocurrencies available on various exchanges around the world.


Bitcoin, the first cryptocurrency to hit the market, has over time become a popular choice for secure digital transactions. Cryptocurrencies are fast taking over the world, with other types of virtual currencies being constantly added to the market. They don't have any tangible form of value, but they are nonetheless considered as valuable as regular currencies.


The presence of cryptocurrency is very volatile and uncertain with different predictions from experts about what will happen to it in the future. Some predict that it will be popular for people who want to make fast transactions, while others see it as a bubble that will eventually pop and disappear into obscurity.


Future: what to expect next!

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The future of cryptocurrencies is hotly debated. One frequent question is whether they are experiencing a bubble, given the jump in prices for some coins. The second question usually revolves around whether or not they will become mainstream mechanisms for payment settlements. What both these questions have in common is that there is no clear answer to either of them, because there are too many unknowns about what may change the cryptocurrency landscape in the coming years.


The current state of cryptocurrency markets today however does not give us a clear picture as to what the future may hold for this technology. The past few months have been tumultuous for all but a few coins. Despite strong fundamentals and market price valuations going into 2017, multiple coins experienced noticeable price movements which indicated that there was turbulence in either their user bases or technological advancements.


Cryptocurrency markets are very much in an up and down pattern which has led to uncertainty. As a result of this, there have been many predictions of what the future of cryptocurrencies will look like. But these predictions have yielded various results, often contradicting each other. For example, one that has been touted recently is that the market cap of cryptocurrencies will hit $1 trillion by 2025. It is fully possible that this prediction could come true, but it does not mean that it will happen by 2025.


A number of factors are driving today's cryptocurrency markets in both short-term and medium-term time frames. However, the future of cryptocurrencies might be bright because they are programmed to have a finite supply that will eventually reach its limit. After reaching this limit, miners will not receive any incentive for their work and therefore cryptocurrency production will stop completely. That being said, there are some potential use-cases for cryptocurrencies that we might see in the future such as:

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  • Currency for international trade and transactions.

  • Replacement for fiat money.

  • Payment system.

  • Unit of account.

  • Standard of deferred payment.

  • Digital alternative to gold and other precious metals.


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