Cryptocurrencies are still in their infancy, however, they have already managed to have a significant impact on global finance, but probably not in the way that most people would think.
The initial idea behind the advent of cryptocurrencies was to create a standard currency which could be traded between people of all nations, digitally. The idea was to create a platform that would allow the instant transfer of funds from one person to another in such a way that the transactions remained anonymous and secure, while also being automatically recorded. This platform came to be known as a blockchain; an immutable ledger which tracks all of the interactions that take place on the chain, which are then verified by all of the users/nodes, to ensure that the information which is stored is accurate. However, many of the factors proposed by the original Bitcoin blockchain, e.g. free and instant transactions, have not come to pass due to problems of scalability. Instead, it is the blockchain technology itself which has started to make waves and is now causing global financial upheaval as people scramble to find new ways to exploit its benefits.
Many entrepreneurs and unfortunately many scammers have made use of the Ethereum blockchain to develop their own ICOs. ICOs are Initial Coin Offerings which work in a similar way to IPOs, enabling people to invest in a new company by buying up an initial release of tokens. The hope for investors is that if the business model is successful, then those who invested in the tokens early on will see the price of the currency rise. ICOs can be very lucrative, but they are also very volatile, and there is no certainty that even if a company is legitimate that it will be successful.
ICOs may or may not become the industry standard used for making investments in the future, but either way, they have enabled small businesses a means to establishing vast sums of capital in a very short period of time.
The Ledger System
Most people tend to think about cryptocurrencies when they hear the term blockchain and, while coins may be an integral part of blockchain mechanics, the information which can be stored on a blockchain doesn’t have to be financial.
Blockchains possess the ability to store information and timestamp it to ensure it’s authenticity and this ability to store data is only just beginning to be picked up by major companies. So far blockchains potential remains relatively untapped but, in the future, it could be used to for anything from keeping secure records of your medical data to letting you know that you need to buy more milk. With potentially endless possibilities, there will no doubt be a knock on effect as people find themselves replaced by blockchains. This problem is likely to be particularly prevalent in areas such as quality control and data analysis.
Banks, as of yet, have remained relatively quiet on the issues of Bitcoin and blockchain technology. However, blockchains have already been implemented in many of the worlds major banks to process internal transactions, in the form of Ripple.
One development that has affected people in the crypto community is the banning of mining or owning cryptocurrencies in some countries. Even some banks in the U.K. have said that they will stop transactions which they believe are being used to buy Bitcoin because they believe that there is too much of a risk factor. In China, on the other hand, the government have set out to create a total ban on cryptocurrencies, despite Bitfinex, one of the largest exchanges, being based in Hong Kong.
Bitcoin and Ethereum have both been used to send money and aid to people living in horrific conditions around the world. In 2017, Gavin Wood, the co-founder of Ethereum, used the Ethereum blockchain to send food vouchers to more than 10,000 Syrian refugees.
Thanks to the ability to send money anonymously and receive funds from anywhere in the world, blockchain can be used to send money to people who would not otherwise have access to it. Until now, most people relying on aid have had to use financial services companies such as Western Union. However, for those in war-torn countries, for whom travelling through the streets means risking death, cryptocurrency transfers afford a far safer and more practical means of gaining funds.
Where do you think the future of cryptocurrencies and blockchain technology lies?