It has been a decade since the cryptocurrency was first introduced in the financial market. It has gained the attention of many over the internet, news and social media. It has definitely come a long way from being valued a few pennies to thousands of dollars that most have never thought of.
Despite its popularity and current value, cryptocurrency is still considered just as a tiny portion of the world’s financial asset. It is valued at around 0.2% of the world’s money supply.
But how far has cryptocurrency gone and what impact it has brought to the global economy?
In the present point of view, cryptocurrency has become a shield or a hedge against the horror of inflation because its number in circulation is mathematically limited.
Moreso, it offers many benefits such as hassle-free transactions and circumvention of capital controls and taxes imposed by many countries to control the flow of money and charge high taxes. Cryptocurrency has also added privacy to its user’s transaction and complete these transactions in a matter of seconds or minutes. The most appealing benefit of cryptocurrency is that it eliminates the use of a middleman in authorizing and authenticating transactions.
With the underlying benefits of cryptocurrency, more and more people are engaging in using it and thereby increasing its demands, price, market capitalization and mainstream adoption.
Cryptocurrency is still on experimental stage on a global scale but seeing its value and popularity today, cryptocurrency can be the future money.
And Cryptocurrencies definitely have a great impact on the global financial market given the fact that governments have been responding to it.
The Downside of Cryptocurrency
But despite the benefits it offers, many central banks remain cautious given the high-profile security issued faced in the past as well as the market’s extreme volatility. Even Japan has not seen a market for it and China has banned it in its country.
In contrast to their benefits, cryptocurrency has listed a variety of risks and vulnerabilities.
Cryptocurrency’s major limitations such as massive energy usage, limited scalability, and concentration of mining pools accompanied with theft of cryptocurrencies from centralized intermediaries, massive fraud by promoters of initial coin offerings and widespread manipulation on lightly-regulated cryptocurrency exchanges have contributed to its undoubtedly high risk.
It also has disrupted the global economy through decentralizing financial transactions on a massive scale.
Cryptocurrency and Fiat Currency
The existence of cryptocurrency in the market will definitely minimize the use of the US Dollar which has been the currency of the global economy.
Given the fact that the global economy has been primarily reliant on US Dollars, the use of cryptocurrencies will definitely change the rules of foreign relations, international trade, diplomacy, and economic sanctions’ impact.
It is decentralization at its finest. It will also create a big impact on the financial sector because of its underlying blockchain technology.
The blockchain has been foreseen to execute transactions faster, improve transparency and auditability of operations as well as transform financial institutions and bring lower costs.
Another edge of it is that it will bring change as to reaching consensus on significant benchmark prices and rates.
With the help of this technology, greater transparency during the process of creating agreed upon reference prices as well as the participation of more people in the consensus process will be achieved.
Blockchain has definitely been considered as a sought-after distributed ledger technology for the financial sector considering its promise of a more resilient, more efficient and better form of recordkeeping.
But blockchain technology is not as simple as it may seem. It is by its nature a group record keeping.
So, for its users to be able to maximize the benefits it can offer, they have to create collaboration among all the members of business which may limit its adoption because of difficulty.
Therefore, the most challenging part in decentralized organization is governance.
Future of Cryptocurrency
Cryptocurrency and blockchain technology are definitely on their immature stage at the moment. But despite this, some of its areas can actually already be deployed effectively.
On a futuristic note, blockchain and cryptocurrencies reflect a new form of trust. But for them to succeed in the future lies on their trustworthiness on top of the basic security of the distributed ledgers.
To become a trustworthy system, they have to address concerns about law, regulation, and governance to be able to scale up to a society-wide adoption. These three concerns must be properly handled without compromising the innovations that the blockchain technology can offer.
Cryptocurrency has definitely offered a revolutionary idea in the global financial market.
This revolution is about to bring change to our world’s economy.
And to achieve that change is not a matter of choice. It is a matter of acceptance that the world is changing, the way we deal with things is changing and this technology that we have in our hands today is what will drive us to a better future only if we use it in a good way.