The current state of cryptocurrencies has a Wild West feel to it. A high number of people and organizations are jumping in to get a piece of the action. It’s chaotic, it’s risky, it’s exciting, and it’s rapidly changing. In barely nine years since the original cryptocurrency, Bitcoin emerged, many hundreds of alternative digital currencies have surfaced. People are using these altcoins, or cryptos, as they’re often known, to buy and sell all types of products and services.
These cryptos are also being used simply as investment instruments, where people try to buy low and sell high. Cryptocurrency has also enabled a completely new form of raising capital, called an Initial Coin Offering, or ICO. It’s giving startups, in particular, a way to raise enormous amounts of cash that would be typically more difficult via traditional fundraising. Cryptocurrencies are challenging financial institutions and governments all over the world. Cryptos are disruptive to the status quo.
Financial institutions must figure out how to work with them as ignoring them is no longer possible. Big players like Barclays, Credit Suisse, and many more are exploring integrating and supporting cryptocurrencies and their underlying blockchain technology into operations, products, and services. Governments are struggling to figure out the right regulation without stifling innovation, but at the same time, protecting markets and individuals. The race is on and the outcome is uncertain. China and South Korea, for example, have gone as far as banning ICOs. China was rumored to be looking at outlawing mining or limiting cryptocurrency mining.
Some countries are exploring creating their own national cryptocurrencies, such as Turkey, Israel, Sweden, and Ecuador. And while this seems counter to the decentralized model of crypto, the details are yet to be seen. The code that runs Bitcoin, which is free for anyone to copy and use, has given birth to hundreds of old coins. Anyone of us can create our own digital currency with a modified copy of Bitcoin software. While Bitcoin continues to dominate as the most popular and respected of the global cryptocurrencies, there is a massive long tail.
Several others dominate and hundreds more wait patiently to merge or die in a noisy and unpredictable marketplace. Among the most popular today include Ethereum, Ripple, Bitcoin Cash, which is different to Bitcoin, Litecoin, Stellar, IOTA, Dash, Monero and Zcash. We can anticipate that this list will change a lot in the months ahead. The underlying technology called blockchain that enables most cryptocurrencies to function, is being used in a massive number of other uses, spanning almost every domain in our economies.
Blockchain technology is being used for supply management, identity management, in government for records management, in mature pilot experiments using the Internet of Things. And with Ethereum, for example, to power a whole new category of applications called distributed apps or DApps.
Cryptocurrencies have engaged a large new community of hobbyists and professionals. It’s also inspired a significant criminal element that uses cryptos in all manner of activity, both across the public internet and in the more sinister, hard-to-reach corners of the dark web. Law enforcement is on it, but the evolving nature of the technology combined with the anonymity of crypto is creating significant challenges.
Additionally, the cryptocurrency world is not without its share of hacking and fraud to add to the security concerns. The current state of cryptocurrencies and the rapid rate of change make it a compelling space to explore. Sure, the risks are significant, but so is the upside. Knowledge is essential, particularly if you’re thinking of using cryptocurrency, investing in it, or creating a business with it. And it will be really important to keep up with it, as I anticipate it’s gonna change rapidly in the months and years ahead.