After the launch of Bitcoin, the world’s first cryptocurrency, there were many skeptics criticizing the project and rejecting its potential. However, contrary to their beliefs, Bitcoin and the crypto assets that followed it have been changing the world in recent years.
Why people choose crypto
The world is changing. In addition to COVID-19, building a new world order, cryptocurrencies are also changing it. In the eyes of crypto enthusiasts, this is just a natural transition. Just as in the past people switched from gold to paper money, in the digital age we live in, people switched to cryptocurrencies or digital money.
Let’s talk about what makes crypto assets better than traditional fiat currencies. We will tell you about some of their vulnerabilities and how they can be avoided or solved. Finally, we will discuss why cryptocurrency is the future and what investors should expect.
To understand why so many people invest in crypto assets, let’s take a look at their main features and use cases.
- Decentralized payments
The main incentive for the development of the first crypto-coin, Bitcoin, back in 2009, was to replace the Central authority responsible for people’s transactions with a new model based on cryptographic evidence. This model is implemented in a peer-to-peer (2P2) network that uses blockchain technology to store and protect transactions.
As a result, cryptocurrency transactions are faster, cheaper, and more confidential than bank transfers. The blockchain charges a small fee for mining without additional maintenance costs. Even if you make an international payment, the procedure is quite simple, unlike bank transfers, when payment processing by the recipient’s bank is usually delayed.
In addition, when sending crypts, the names of the sender and recipient are hidden. Instead, the blockchain shows their public key, which is an encrypted address that acts as an alias. This is why we say that cryptocurrency transactions are not anonymous, but pseudonymous.
The deficit refers to the total amount of a given cryptocurrency, or the number of coins in circulation. Unlike the unlimited supply of fiat currencies, the supply of most crypto assets is limited. For example, the founder of Bitcoin, Satoshi Nakamoto, severely limited his coin at 21 million BTC.
What is even more interesting, despite the growing demand, the process of mining crypts continues at the same speed. When the demand for crypto assets increases, the difficulty of mining them increases. This inelasticity of supply is the cause of price instability-a quality that turns cryptocurrency into a risky but profitable investment.
Cryptocurrencies are gradually turning into global virtual currencies due to their multi-faceted utility. On the one hand, these are profitable investment assets that allow investors to diversify their portfolios. On the other hand, they are increasingly used as means of exchange.
During the COVID-19 pandemic, contactless payments have become both a necessity and a rule, resulting in more and more merchants accepting cryptocurrency as a payment method. For example, in partnership with the Salamantex payment system, more than 2,500 merchants in Austria support payments made using Bitcoin, Ethereum or Dash.
In addition, leading payment companies such as PayPal, Visa, and Mastercard also advocate for crypto assets.
What are the problems of cryptocurrencies
One of the main problems faced by the crypto industry today is the lack of a single reasonable regulation. Their decentralized nature makes it difficult for governments to develop a suitable regulatory framework. On the one hand, this may compromise their decentralized nature, but on the other hand, it may provide better protection for users.
In countries such as Australia, the United States, the United Kingdom, and Canada, cryptocurrencies are considered proprietary. As a result, crypto profits are subject to capital gains tax.
Another problem that affects crypto investors is the unstable and volatile nature of the cryptocurrency market. You should be very careful when choosing the asset you want to invest in, if you don’t want to be a victim of experienced investors ‘ schemes of price pumping and dumping.
These investors, known as” whales”, create a buzz around the new crypt to entice newcomers to buy coins and raise their price. When this happens, whales sell their assets and cheated investors lose their money.
We have seen how cryptocurrencies are used today, and now let’s see what the future holds for these assets.
What is waiting for the crypto industry?
Cryptocurrencies have come a long way. Based on innovative blockchain technologies, the concept of crypt as a digital asset covers various areas.
Digital currency is not seen as just speculation. Instead, in 2020, they are already perceived as investment instruments, security tokens representing a tangible asset, a payment method, and more.
Its significance and role have expanded significantly. From simple trading to investment tools. The crypto industry is booming. Moreover, the use cases for crypto assets are not limited to financial transactions only. Instead, digital currencies have already appeared with different applications in different industries.
Let’s take a look at what the future of cryptocurrency looks like, given the achievements in this sector.
- Investment instruments
Over the past three years, well-known organizations have started offering services related to the cryptocurrency industry. Thus, institutional investors, hedge Fund managers, and investment managers began to show interest in cryptocurrencies. Now, investors are looking to include digital assets in their diversified investment portfolios.
A recent survey of 400 institutional investors and hedge Fund managers found that almost 72% of them are looking to invest in digital assets.
The industry has always attracted interest from retail investors. Now, with the advent of institutional investors, cryptocurrencies are much more likely to be seen as investment instruments along with stocks and gold.
- Simplification of the rules concerning cryptocurrencies
Over the past two years, governments in a number of countries have changed their stance on cryptocurrencies and digital assets. The German financial authority has classified Bitcoin and other crypto assets as official custodians of value, and the Supreme court of India has lifted a ban on trading digital currencies.
Currently, many governments have started to develop rules that provide a legally compatible environment for trading and investing in cryptocurrencies.
In the near future, we will probably see countries develop rules regarding the use, trade, and storage of digital currencies.
- Crypt causes a failure in the banking and financial sector
Although cryptocurrency use cases have begun to evolve in many industries, the financial ecosystem is the first of many that may undergo major changes. From cross – border transfers to tokenization of financial instruments, cryptocurrencies are used in various areas of the banking and financial industry.
More than 20 countries have already completed the creation of Central Bank digital currencies (CBDC).
According to the study, 90% of US and European banks have already started studying blockchain and cryptocurrencies.
Yes, interest in Central Bank digital coins (CBDC) is growing all over the world. For example, the Bank of China is currently testing its CBDC program in many major cities in China. Banks in England, Sweden and France are also ready to launch CBDC. The largest Russian Bank SBER has already announced that it is launching its own stablecoin-Sber Coin.
Some experts say that this indicates their willingness to recognize the potential of cryptocurrencies and blockchain technology. They see this as a step towards solving the problem of financial inclusion in many developing countries. But this is far from the case.
Blockchain is, but cryptocurrency is the enemy of the traditional financial system. CBDC and others like them are a way to contain, not accept, the crypt, because many governments have decided to limit its global adoption in this way.
- The center for the exchange of cryptocurrency
As all crypto operations and investments quickly gain interest, there will be an unavoidable need for a supporting infrastructure. Current digital currency trading methods are not sustainable in the long term due to inconsistencies in methods and processes.
In the near future, we will probably see the emergence of exchange nodes offering multiple solutions on the same platform.
For example, exchange centers such as Finxflo, a hybrid liquidity aggregator, offer traders a one-stop solution to access the best prices in the cryptocurrency market with minimal problems. In addition, this exchange center allows you to store, manage, buy or sell digital assets from a single portal instead of switching between multiple interfaces.
- Widespread use of cryptocurrencies
In addition to being seen as an investment tool, it is likely that it will play a more prominent role in our daily activities. The concept of digital currencies is becoming more familiar.
In addition, they offer many advantages when used as a payment transfer method. Merchants, retailers, and organizations have begun to recognize this fact.
A recent survey shows that 36% of small and medium-sized businesses accept Bitcoin as a payment method in the US alone. This number is likely to grow in the coming years as cryptocurrencies become mainstream.
- Innovation with crypto tokens
In the coming years, tokens are likely to be integrated with other technologies and innovations. This includes AI, smart contracts, and the Internet of things (IoT). Tokens will be used to provide supporting infrastructure, create intelligent tools, and implement automation through the integration of innovative technologies.
For example, smart locks (an IoT device) can only be unlocked if the owner deposits cryptocurrency tokens into the specified wallet. A smart contract with encoded rules can further automate this system.
- Decentralized applications
Decentralized applications (dApps) are developed on the basis of blockchain infrastructure. Blockchain-enabled applications are developed for various industries, including healthcare, supply chains, games, logistics, food, and agriculture.
Tokens will serve as fuel for a decentralized application network as a service function for accessing dApps products and services. As decentralized applications are rapidly developing for a variety of industries, the number of digital currencies will be much larger in the next few years.
What to expect next?
The potential of digital currencies based on blockchain technology is unprecedented. Looking at the current achievements and projects that are being implemented in the crypto ecosystem and blockchain, we will witness failures and changes in many industries. Even current statistics, analysis, and numbers show that blockchain will be one of the greatest innovations of this century.
Thanks to its advantages and subsequent developments in the cryptocurrency arena, the perception of the entire industry has changed. The question of how the future of cryptocurrencies has changed, and what is the scale of the impact of this change on our future, will continue to excite the minds of experts and analysts for a long time. One thing is certain: these changes are huge.
We recommend that you invest in cryptocurrency. This way you will save money for the future and protect your assets from inflation and devaluation. It’s easier than you think!