The Current State of Cryptocurrency - early 2018

Cryptocurrency market is facing various problems. Ranging from the risk of hackers to the possibility of a sudden fall in the value of one’s assets. However, with increasing acceptance among various sectors, its use is being normalized to a considerable extent due to the number of benefits associated with the technology. With the value of bitcoins showing a steady increase over the past few years and the growing possibility of governments recognizing it around the world, the industry has attracted a plethora of investments from various fields.

In this article, we will analyze the current state of the cryptocurrency or the digital asset market, and whether it should be seen as the future of money.

BTC value chart from coinmarketcap.com

Blockchain technology

Considering that the entire network of transactions works on a peer-to-peer basis, various other industries are certain to gain benefits out of blockchain technology. With costs and efficiency improvements on transactions due to the internet, blockchains are sure to have their say on the way groceries are bought and billed, how stocks are bought and traded, and how people are able to transfer money to their relatives in other countries.

Blockchain technology can also be used to track and monitor the health of patients in hospitals, giving way to a new form of transactions that are quicker, more efficient, and easier to use those existing systems.

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Use cases of Blockchain

Governmental regulations

Plans are already in place for the Indian government to regulate the selling and buying of cryptocurrencies in India, according to a February 2018 report. With the Indian government taking a stern stance against cryptocurrencies, various other countries have come to terms with the idea of digital currencies.

In February 2018, Venezuelan President Nicolas Maduro pitched a new proposal for a virtual currency called Petro, with each unit of the pitched cryptocurrency to be backed by a barrel of oil.  The president revealed that the country received presale orders worth 6 billion USD although the proposal received a barrage of criticism from the opposition.

In December 2017, the Russian Ministry of Finance along with the Bank of Russia introduced a bill in the parliament with regard to the regulation of cryptocurrencies, which were sought to be put under the category of ‘other assets’, making Russia one of the first countries to come up with regulations for any form of digital currency. Furthermore, in February 2018, the Russian ministry revealed plans on holding a BRICS meeting with regard to the creation of a multinational cryptocurrency.

Apart from this, there have been governmental talk in China and Sweden in relation to the possibility of regulation of cryptocurrencies. These incidents go to show how the world is moving towards the era of digital currency, and it is only a matter of time before governments around the world take notice and start passing regulations on the sale and purchase of cryptocurrency.

If cryptocurrencies are to become the currency of the future, governments need to recognize the potential benefit that exists in the technology. If digital currencies take over the current ones, governments can easily regulate the cash flow, make transactions traceable, and track down tax evasions easily and effectively.

Cryptocurrencies in everyday life

In January 2017, the US government unveiled plans on issuing a cryptocurrency called FedEx, with investors looking at the possibility of the cryptocurrency eventually competing with bitcoin. The possibility of bitcoin becoming a central feature of people’s lives has already been visited by investors across the world who are putting their money in various startups to cater to the needs of the growing industry.

It seems only a matter of time when the lingering issues behind the high volatility and unease of transactions are solved, paving the way to a future where transactions are handled via digital currencies. Cryptocurrencies have the potential to wave away the need for banks to act as a central transactional authority for everyday transactions, making it possible for them to happen without central registration, clearing delays, settlement risks, and transactional fees.

Value of bitcoins

Normal currencies today have their values determined by the exchange rate, treasury notes, and the measurements against foreign exchange reserves. With cryptocurrencies, the value depends upon a lot of factors but increases with the number of customers that use them.

Investors have speculated that the value of bitcoins is set to increase to 100,000 US dollars by the end of 2018, which is an 8 times increase from the current valuation of 12,000 dollars per bitcoin. While such predictions are exaggerations, the value is sure to increase considerably over the coming years, continuing their cyclic trend, which is sure to force governments to eventually enforce regulations.

Role of other parties

With governments around the world almost certain to play an important role in the future of cryptocurrencies, various other intermediaries will also be affected. The technology has the potential of eliminating the need for a considerable amount of manpower employed in various industries. The banking sector can adopt blockchain technology to keep a better track of the transactions and accounts opened with them. The consumers participating in transactions place their trust in the technology, making transactions trackable yet anonymous, and doing away with the need for a central institution.

If cryptocurrencies continue their upward trend in terms of the number of consumers and transactions, banks run the danger of becoming obsolete. The need for banks will only exist in relation to other forms of services such as credit accounts and ledgers. The banking industry is not going to only suffer at the hands of bitcoins, with the blockchain technology and ‘smart contracts’ having the potential to transform the way bank guarantees are made and verified. Banks can take assurance from the fact that it is still going to be decades before cryptocurrencies completely take over the currencies of today.

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Smart contracts - Key use-cases and their Importance

In the near future, there is a lot of scope for a situation of coexistence, where banks continue to operate with respect to tangible currencies and the cryptocurrency revolution continues to unfold.

What do you think? What lies in store for cryptocurrencies and how will the governments respond to them? Do let us know in the comments.



By Rishabh Bhatnagar:
Rishabh is a law student with a passion for Blockchain / Cryptocurrency, Internet of Things (IoT), Cloud Computing, Artificial Intelligence, and Startups. He is an avid reader with a taste for writing. He likes learning about new things and is a writer at TechSutram. You can contact him in our contributors' section. Opinions expressed by techsutram contributors and partners are their own.