The cryptocurrency fans are enjoying the hype.
As a fan of crypto, I am entertained by the ups and downs of crypto prices, specifically Bitcoin, Ethereum, Bitcoin Cash, Basic Attention Token (BAT), Hive, IOTA, and many other new innovative coins.
There is a little bit of similarity between cryptocurrency and stocks in their varying price caps. The market fluctuates along with the choices of the people. The sellers and the buyers rule the market economy.
The crypto market entertains its players
The student community, the investors in the financial market, the buyers, the blogging and gaming community, the entertainment industry, the healthcare sector, and the regulatory boards are singing songs for or against cryptocurrencies.
But, cryptocurrency is not at all a piece of entertainment.
Cryptocurrency is a hardcore technological solution for managing digital money and assets. Cryptocurrency can associate diverse financial and non-financial applications ranging from digital contracts, certificates, gaming, films, songs, digital art, rewards, lotteries, etc.
Even though many crypto startups don't survive in the market, the core technological innovations around distributed computing remain at the forefront of cryptography. The technology undulates the mind of the researchers and developers of distributed computing and distributed ledger technologies in general.
Cryptocurrency is a technological innovation
The backbone of cryptocurrency is distributed computing using Blockchain, one type of distributed ledger.
Decentralized computing is not new, which is a part of distributed computing. Only in the recent past, the power of distributed computing has been renewed with a number of distributed ledgers, such as Blockchain.
The first real-world cryptocurrency started its journey when the first transaction of Bitcoin was registered in Blockchain. It is well-known as the "genesis block" or the first block in a Blockchain. The modern version of Bitcoin terms it as "block 0."
There are cryptocurrencies that don't use Blockchain but block-less distributed ledgers, such as distributed acyclic graph (DAG).
One such distributed ledger is called IOTA, based on block-less distributed ledgers. IOTA is a very efficient technology in terms of transaction time and cost, ready for Internet-of-Things (IoT) devices.
Cryptocurrency is a mixed bag
Cryptocurrency has a few bright pros and some dark cons.
Any cryptocurrency has the following advantages
Cryptocurrency enables peer-to-peer transfer of funds in a relatively secure method and anonymously. No name and physical address are connected with cryptocurrency transactions.
Cryptocurrency is decentralized. There is no central administrative authority to control the cryptocurrency accounts, transactions, and price cap.
In some countries, the governments don't deduct income tax from cryptocurrency earning. There, the income from cryptocurrency is fully exempted from deduction of income tax. One such example is probably Portugal.
Cryptocurrencies may produce problems due to the following reasons
The anonymity of the cryptocurrency accounts may help hackers from dark networks to collect ransomware. Today, the police and law don't have the tools to catch the hackers of the dark networks.
If the private key associated with a cryptocurrency wallet is lost or stolen, associated digital assets are lost forever. (IMPORTANT)
If a cryptocurrency wallet service is suddenly closed or shut down, no central administrative office or authority remains to complain.
If a cryptocurrency/token suddenly vanishes, no central administrative office contact to catch or complain.
There is no provision for creating a legal document or will for an inheritance to the lawful heirs in cryptocurrency assets. (IMPORTANT)
Cryptocurrency being purely a digital asset, we can't deliver cryptocurrency to a person who doesn't have internet access.
Cryptocurrency price fluctuates due to news hypes
The top crypto coin holders create the market hype. It is a marketing strategy to woo new investors. This hype is a technique similar to the stock market hype. This hype is not directly related to crypto technology. The market hype and quality of technology go parallel without any clash.
Sometimes, celebrities from the corporates or entertainment industry endorse particular cryptocurrencies. It is clear that the particular administrators of the cryptocurrency convince celebrities to make paid promotions.
One such instance is when Elon Musk announced to sell Tesla cars with Bitcoin payments. The price of Bitcoin skyrocketed the following days. The cryptocurrency market is not immune to fluctuation due to hype news. The mainstream news media may also be a partner in propagating market hypes.
Predictive conclusion -- Final words but not the last words
Cryptocurrency is purely a technological innovation. Hypes bring much-needed funding to the crypto domain. It requires innovations to improve its performance. But the technology of the Bitcoin Blockchain seems stagnant.
Lightning Network is an innovation that claims to improve the scalability issues of Bitcoin. Bitcoin Cash is a promising innovation to improve the problems of scaling. Bitcoin Cash increased the block size and significantly reduced transaction time and cost.
If we wish that cryptocurrency would compete with the traditional digital financial systems powered by VISA and Mastercard, new technological innovation is needed. Incremental improvements in the consensus algorithms or block sizes are not enough to yield the required results that can beat the traditional power of VISA and Mastercard.
Something different from traditional distributed ledger technology may do the job simplistically and more efficiently.
The brighter side of the technology of cryptocurrencies is that one can utilize the same technology for plenty of non-financial applications, which can significantly improve human life.
Postscript
If you are a seasoned player in the stock market, you are already better qualified to play in the crypto market than hardcore techies.
I am a tech researcher and closely watch the new research innovations in distributed computing. The associated technologies are under continual development. In my vision, some discoveries may blow away the existing technologies of cryptology and cryptocurrency.
Cheers!
Lead Image: I created the animation with my texts and a Photo by Karolina Grabowska from Pexels. Sources of all other images are mentioned below the respective images.
Disclaimer: All texts are mine and original. Any similarity and resemblance to any other content are purely accidental. The article is not advice for crypto investment. Do your research before indulging in any crypto investment.
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December 16, 2021
