Cryptocurrency is a relatively new development in the history of finance – and probably the most important one in centuries. But despite all the talk around it, its front-page grabbing valuations, and the various high-profile champions of it, plenty of us are still unclear on what cryptocurrency actually is.
So, what’s the blockchain, why has crypto had such an amazing decade, and is it too late to get involved anyway?
What is the blockchain?
The blockchain is a distributed database that allows for secure, transparent and tamper-proof record-keeping. Cryptocurrency is created through a process called “mining”, which involves verifying and adding transaction records to the blockchain. While this is its main association, blockchain technology is being used in a variety of industries, and proliferating across the tech space.
Why has cryptocurrency done so well in the last decade?
Cryptocurrency has done so well for a variety of reasons. One reason is that it is not subject to the same regulations as traditional currency. This allows for more flexibility and freedom when it comes to transactions.
Cryptocurrency has become a popular form of investment for this exact reason – because it offers the potential for high returns in far shorter timeframes than traditional investment. For example, the price of Bitcoin, the most well-known cryptocurrency, was around $900 at the start of 2017, increasing to almost $17,000 by the last quarter of 2022. Apple, the worlds most valuable company, increased from $30 a share to around $150 in the same timeframe.
Another reason is that cryptocurrency is not subject to the same rules and regulations as traditional currency. This can be a good thing or a bad thing, depending on how you look at it. Some people see it as a way to avoid government control and taxation, while others see it as a way to get around the law. Some countries have taken steps to regulate crypto currencies, but this is uncommon.
In the United States, for example, the Securities and Exchange Commission has been struggling to figure out how to regulate crypto. The problem? Cryptocurrency is not like other investments, such as stocks and bonds – it is not regulated by any central authority, and regulating it in such a fashion would fundamentally change how it functioned.
What industries make good use of cryptocurrency?
While its purpose as an investment is probably the best-known use of cryptocurrency, it was never originally intended to be used as such, but rather as a usable currency like any other. The original point was to be able to pay for goods and services, mainly online ones, anonymously, with no data-trail or foreign currency conversion fees. This is a major advantage of Bitcoin over other payment methods, such as credit cards or PayPal. Credit card companies and PayPal can trace your purchases and often charge foreign currency conversion fees.
This anonymity makes it great for those of us less keen on sharing our data, and it’s for this reason that crypto use thrives in scenes such as gambling and betting, where we might not want to broadcast our bigger wins.
According to Bitedge.com – Crypto sports betting is doubly benefitting from the crypto boom, as sites can offer better odds when cryptocurrency is used thanks to the lack of third-party involvement and reduced fees they have to deal with. Some major retailers are also now accepting the larger coins – Bitcoin, Ethereum, and Litecoin are often the most common – for normal checkout processes, such as Overstock.
Is it too late to get involved with cryptocurrency?
Some sceptics have made the bold claim that cryptocurrency is ‘dying’ – but nothing could be further from the truth. While the initial goldrush is over, this paves the path for a slower, steadier, healthier growth of cryptocurrency value. The current market situation is much more conducive to long-term success, as investors are more interested in sustainability than quick gains.
This is evident in the increasing number of institutional investors who are entering the market and the growing number of regulations being put in place. Both of these trends point to the overall stabilisation of the industry, which is good news for the future of cryptocurrency. Provided that crypto doesn’t become a non-anonymous or centralised payment option, other regulations can only help current and future investors.
One such example would be regulation designed to prevent the ‘pump-and-dump’ scam with smaller currencies, where investors purchase a large amount to create the illusion of demand, then sell at an artificially inflated price – leaving other investors holding an empty bag.
Overall, cryptocurrency is becoming an ever-safer and ever-simpler industry and getting involved could be right for you – just remember to do your research first!