While it only seemed like yesterday that we were talking about new mobile wallet features for smartphones or new AI gadgets on holiday shopping lists, now the topics of conversation are virtual currencies, blockchain technologies and cryptocurrencies. Let’s look at cryptocurrency news and information to understand how cryptocurrencies like Bitcoin work and how blockchain technology may change future transactions in retail and banking.
Cryptocurrencies and Blockchain Technology
Cryptocurrencies are a form of peer-to-peer cash and not to be confused with a mobile wallet. Mobile wallets enable consumers to send money from their smartphones using their credit cards and bank accounts. Cryptocurrencies, on the other hand, are virtual cash, so there’s no need for banks or transaction and chargeback fees, hence the high demand.
Cryptocurrencies like Bitcoin use blockchain technology, a decentralized ledger that allows virtual currency exchanges. Developers are working to improve cryptocurrency mining that can help retailers and consumers eventually use cryptocurrencies for their daily transactions. There are about 3,000 different types of virtual currencies aside from Bitcoin that include Litecoin, Ethereum and DogeCoin. Altcoins are another type of cryptocurrency, but it’s Bitcoin that’s generating the most attention and buzz.
The Bitcoin Buzz
Bitcoin is getting a lot of attention lately. While investors have been curious about this new cryptocurrency, the SEC has issued recent warnings because Bitcoin’s sudden growth spurts. Bitcoin (BTC) has exceeded the price of gold, the U.S. dollar and almost hit $20,000.
Bitcoin’s record was $19,783 on December 17th and on December 20th, it was trading at about $17,000 after the SEC issued a stern warning about associated risks with deregulated cryptocurrencies. With so much attention over Bitcoin and the potential associated with new cryptocurrencies, Goldman Sachs has announced it will set up a trading desk for Bitcoin and other cryptocurrencies.
A large number of investors "want in" with Bitcoin. Despite the heightened volatility based on inherent value, not intrinsic, Bitcoin has huge potential. Investors see a tax-free currency they can hold onto and its 6 percent growth has Bitcoin poised to lead the break away from traditional banking and currency systems. By comparison, its growth is comparable to that of Amazon in how its redefining the retail space.
Bitcoin, a technology-driven payment form, was started back in 2009 by a man named Satoshi Nakamoto. His intent was to create an online currency that bypassed bank fees and regulations. At present, there are 14 million Bitcoins in circulation and as a new cryptocurrency, its limited access is making potential investors curious.
Initially, Bitcoin was designed as an electronic currency for small transactions based on secure, cryptographic codes using features commercial banks rely on to protect their transactions. Bitcoin uses special algorithms and it’s non-manageable, meaning that no one can go in and "hack it" because it’s not tied to a specific bank, albeit there have been small breaches.
Because cryptocurrencies have so much potential, a lot of investors are taking note, and cryptocurrency miners are trying to make virtual currencies available for businesses for retail transactions. It may take time, though, because virtual currencies gain value with popularity and use as cybersecurity protocols need to be implemented.
Additional cryptocurrencies may lead to banking declines as peer-to-peer currencies will make the need for banking obsolete. There won’t be a necessity for credit applications, loans or specific banking requirements which may end paper currency transactions and ATMs. Electronic contracts may include special encryptions for payments, albeit that’s still down the road.
For now, there’s groundbreaking potential with cryptocurrencies. PwC estimates only 6 percent of consumers understand them, meaning it may be a while before they are commonplace, replacing mobile wallets and conventional business practices utilizing banks. So, you may not stop writing checks, swiping cards or tapping smartphones just yet, but do keep an eye on Bitcoin and the cryptocurrency marketplace as things are changing fast.