Overview of Cryptocurrency
Cryptocurrency has become a phenomenon around the globe. Today, leading banks, accounting firms, software companies and governments attempt with great effort to research cryptocurrencies, publishing a paper about them or even starting a blockchain project. Cryptocurrency is fundamentally digital money. We store this money in a record book distributed in computers around the world instead of storing it in a bank. This record book is known as a blockchain- also known as a distributed ledger.
What is a block-chain?
We can use a blockchain to store many things, notably to record transactions between two parties efficiently and in a verifiable and permanent way(The Truth about Blockchain, IansitiKarim, Marco; Lakhani, R. Lakhani, 2017). The most prominent use of blockchain nowadays is sending and receiving money. For example, I want to send money overseas to my brother using cryptocurrency. The moment I click to send money to my brother, a new line item - or a block -which details the transaction; is added to the record book. There are hundreds of computers around the world having a copy of this record. This line item has to match up with every copy. As a result, computers will agree or disagree with whether or not this line item is legitimate and give it a pass for the transaction to occur. It is as if we had hundreds of friends surrounding us and witnessing us as I handed the money over to my brother and confirming that the transaction did, indeed; happen.
3. Bitcoin and its value as an investment
According to Business Insider, Bitcoin was the first cryptocurrency created in 2009. It is also the most well-known cryptocurrency to date. Other popular cryptocurrencies are Litecoin, Ethereum and Zcash. Bitcoin priced never topped $1 in 2010. Its highest price of the year was $0.39. However, its price has soared to around $11,000 as in November 2017. Its value now has increased by nearly 28,200 times since it first arrived. Bitcoin has now dubbed the hottest commodity (The independent,2016).
It attracts a lot of Millennials, who are digital natives. According to the 2015 Coindesk report, 60% of Bitcoin users (or buyers) are represented by the under the 35-year-old bracket.
4. Bitcoin as a payment method
Bitcoin makes a fabulous investment for now. The value in itself is comparable to gold. However, there is some concern as to how to make Bitcoin an efficient payment system. Analysts from Bank of America Merryl Lynch (BAML) had expressed some doubts around this: "The most important technical issue, we think, is to do with the coin’s capacity to scale". It is due to the speed of Bitcoin transactions and the transaction fee. The fee for each transaction to be validated by Bitcoin miner is $4.60 in the first quarter of 2017 (Business Insider, 2017). We do not strictly enforce it like a transaction in a bank; however, if there is no appropriate fee, the occurrence is at risk of not being processed by miners. The speed of each transaction's confirmation time was around 10 minutes. There are currently 300,000 transactions made per day. For instance, if a retailer has approximately 20,000 transactions per day to process, with the current Visa payment systems, it will take around 1 second to complete those. It would take probably 100 minutes to complete one second's worth of transactions. Bitcoin and other digital monies are playing a more and more crucial role in the global financial system. However, whether or not it will be the dominant means of exchange in the future will be in question.
5.Conclusion
Cryptocurrency has been explosively popular over the last decade or so. We can conclude that over the 5-year timeframe, Bitcoin and other cryptocurrencies will experience more growth. We should include them in an investment portfolio based on research (The future of Cryptocurrency, 2016). However, to be the means of exchange, the Blockchain platform needs significant updates before we can consider Bitcoin as a means of payment.