Cryptocurrency: The Fintech Disruptor

Blockchains, sidechains, mining – terminology in the underground world of cryptocurrency accumulates minutes. While introducing new financial conditions into an already quirky financial world sounds unreasonable, cryptocurrencies offer a much-needed solution to one of the biggest annoyances in today’s money market – transaction security in the digital world. Cryptocurrency is a defining and destructive innovation in the rapidly evolving world of financial technology, an appropriate response to the need for a secure exchange environment in the days of virtual transactions. At a time when trades are just numbers and figures, cryptocurrency offers to do just that!

In its most basic form, the term cryptocurrency is the concept of an alternative virtual currency that promises secured anonymous transactions through peer-to-peer network networks. The erroneous name is property rather than actual currency. Unlike everyday money, cryptocurrency models operate without a central body as a decentralized digital mechanism. In a distributed cryptocurrency mechanism, money is issued, managed and maintained by a network of colleagues in the collective community, whose ongoing activities are known as mining by car peer. Successful miners also earn coins by estimating their time and resources used. After use, the transaction information is broadcast to the blockchain in the public network, not allowing to spend each coin twice from the same user. The blockchain can be considered as a cash register. The coins are secured behind a password-protected digital wallet that represents the user.

Deliveries of coins in the world of digital currencies are decided in advance, without manipulation, by any individuals, organizations, government agencies and financial institutions. The cryptocurrency system is known for its speed, as transaction transactions through digital wallets can materialize funds in minutes compared to the traditional banking system. It is also largely irreversible by design, further reinforcing the idea of ​​anonymity and eliminating further chances of finding the money back to the original owner. Unfortunately, notable features – speed, security and anonymity – have also made cryptocurrencies a way to trade for many illegal transactions.

Just like in the real world money market, exchange rates fluctuate in the ecosystem of digital coins. Due to the finite number of coins, as the demand for the currency increases, the value of the coins increases. Bitcoin is the largest and most successful cryptocurrency to date, with a market capitalization of $ 15.3 billion, occupying 37.6% of the market and currently priced at $ 8,997.31. Bitcoin entered the foreign exchange market in December 2017, when it was traded at a price of $ 19,783.21 per coin, before a sudden drop in 2018. The decline is partly due to the rise of alternative digital coins such as Ethereum, NPCcoin, Ripple, EOS, Litecoin and MintChip.

Because of the rigid supply constraints, cryptocurrencies are considered to be the same economic principles as gold – the price is determined by limited supply and fluctuations in demand. In the conditions of constant fluctuations of exchange rates their stability still needs to be found out. Thus, investments in virtual currencies at this point are more speculative than the daily money market.

After the Industrial Revolution, this digital currency is an indispensable part of technological breakdowns. From the point of view of the casual observer, this rise can look at once exciting, threatening and mysterious. While some economists remain skeptical, others see it as a lightning revolution in the monetary industry. Conservatively, digital coins are going to displace about a quarter of national currencies in developed countries by 2030. This has already created a new asset class alongside the traditional global economy, and a new set of investment funds will come from cryptocurrencies in the coming years. Recently, bitcoin may have plunged to focus on other cryptocurrencies. But this does not indicate any failure of the cryptocurrency itself. While some financial advisors emphasize the role of governments in fighting the underground world to regulate the central governance mechanism, others insist on the current free flow. The more popular cryptocurrencies are, the more attention and regulation they attract – a common paradox that violates the digital note and blurs the main purpose of its existence. Either way, the lack of intermediaries and control makes it extremely attractive to investors and daily trading changes dramatically. Even the International Monetary Fund (IMF) fears that cryptocurrencies will displace central banks and international banks in the near future. After 2030, regular trade will be dominated by the crypto supply chain, which offers less friction and greater economic value between buyers and sellers who own the technology.

If a cryptocurrency seeks to become an important part of the existing financial system, it will have to meet very different financial, regulatory and societal criteria. It should be protected from hackers, user-friendly and strictly protected to offer its main benefits to the core monetary system. It must maintain the anonymity of users without being a channel for money laundering, tax evasion and online fraud. Since this is necessary for the digital system, it will take a few more years to understand whether cryptocurrency will be able to compete with the real world currency in full swing. While this may happen, the success of cryptocurrency (or lack thereof) in solving problems will determine the state of the financial system in the coming days.