The Purpose and Impact of Cryptocurrencies

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The Purpose and Impact of Cryptocurrency

ForexMinute.com – The cryptocurrency project was created on the principle that transactions can be securely processed on a decentralized peer to peer network without needing a central clearinghouse. The nature of the open source cryptocurrency protocol assuages the traditional disadvantages such as chargebacks or double spending due to the use of signed encryption keys, henceforth removing risk of fraud by the merchant.

The popularity of cryptocurrency technology has spread through the general public mostly as not only being means to store and transfer wealth, but also secure e-commerce. Ironically though, the technology has been targeted by malicious actors seeking exploitation of the experimental nature of the protocol. These attacks have been in the form of data breaches, attacks against end users, and state regulations and enterprises.

Some factors that determine the worth of a currency are whether people will accept it in exchange for goods and services and second, they derive their value partly through their scarcity and underlying, which both are quite hazy in the case of crypto currencies hitherto. One such example is the Bitcoin. Before going any further into Bitcoin, let us establish the fact that both the above factors are essentially the indicators of confidence in the currency.

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To the current state where the experts suggest that Bitcoin is headed for a speculative bubble. The currency swinging as much as 50% in value over some single days represents the very lack of faith. Since Bitcoins can be spent on the Web without a bank account, they offer a convenient system for anonymous purchases and there being no centralized storage of funds, accounts cannot be frozen by law enforcement. Illegal stuff will be a niche for Bitcoin.

But Bitcoin’s supporters are confident the free market can solve that problem as Bitcoin’s advantages attract more nonspeculative buying and selling. Moreover it seems probable that the price of crypto currencies will continue to rise in the future due to limitations of the supply and the finite caps on availability for mining.

Profits for Miners

The increase in difficulty to access and corresponding increase in market price is beneficial for miners who have been in the business for long periods of time. On the contrary, miners who fell into a cryptocurrency love after the constraints significantly increased, few being latecomers or ‘pool jumpers,’ (miners who constantly switch currency for momentary profitability), are not only less likely to benefit from crypto market fluctuations but may even suffer as it will take a longer period of time for them to match their return on investment as they may not have a well planned crypto currency portfolio.

To contact the writer of the article: Yashu Gola at yashu@forexminute.com