Overview
Today’s digital money is called cryptocurrency, and it is a digital or virtual currency encrypted by encryption to prevent counterfeiting. Most cryptocurrencies are based on decentralized networks based on blockchain technology; an open-source distributed ledger maintained by a worldwide network of computers. The bitcoins could not be manipulated by a government since no central authority issued them. This is one of the most distinctive features of cryptocurrencies (Arikan, 2020).
Consider the following to better comprehend cryptocurrency. The ledger entries define cryptocurrency, which is an online payment system value in virtual tokens. Throughout cryptography, there are various techniques and algorithms used to secure entries, including elliptical curve cryptography, public-private key pairs, and hashing algorithms.
A broad range of Cryptocurrencies may be purchased. Bitcoin was the first blockchain-based cryptocurrency in the world, and a remains today’s most popular and valuable cryptocurrency. Hundreds of alternative cryptocurrencies with their own set of features and characteristics are available today. There are Bitcoin forks and even clones of Bitcoin, but some are completely new forms of currency. An individual or group known only as Satoshi Nakamoto developed Bitcoin in 2009, the year it was first established (Keenan, 2020).
Approximately 858.9 billion bitcoins were in circulation at the end of August 2021, with a total market value of about 18.8 million bitcoins, and the value was continually fluctuating. Inflation and manipulation are prohibited since only 21 million bitcoins exist. Besides Litecoin, Peercoin and Namecoin, Ethereum, Cardano and EOS are also available. Many of the alternative Bitcoin cryptocurrencies are known as altcoins, and some of them are mentioned below. Bitcoin accounts for about 46.5% of the total value of all existing cryptocurrencies by Aug. 2021, with the entire value of all cryptocurrencies exceeding $1.8 trillion (Keenan, 2020).
The pros and cons of cryptocurrencies are evaluated in this section. Firstly, the beneficiaries are mentioned. Through the use of blockchain technology, money transfer between two parties could be made more efficient by eliminating the need for a third party, such as a bank or credit card company, to act as an intermediary. This is carried out via the use of public and private keys and other kinds of incentives, such as work and stake proof, in order to guarantee the security of transactions.
An individual’s wallet or account address holds a public key; meanwhile, the private key which is used to process the transaction and is known only to its owner is hidden from the rest of the world. Fund transfers are made at the lowest possible cost for processing, which allows clients to avoid the exorbitant charges imposed by banks and financial institutions in the transfer of funds through wire transfers (Hellwig, Karlic and Huchzermeier, 2020).
Moreover, since crypto currency transactions are semi-anonymous, they are especially suited for laundering money and evading taxes, as well as other illegal activities. Bitcoin advocates, however, emphasize anonymity as a reason for why cryptography is a reasonable mechanism for monitoring repressive regimes and protecting whistleblowers. There are numerous kinds of cryptocurrencies, each of which has its own privacy degree.
Bitcoin is especially terrible when it comes to conducting illegal business online. This is because Bitcoin blockchain forensic screening has helped law enforcement agencies capture and prosecute criminal in the past. More privacy-based cryptocurrencies, for example Dash, Monero, and ZCash, are nevertheless available, which are harder to trace.
Evaluate the problems/pain points/gaps
In this paragraph some of the unique or rather complex aspects of bitcoin and other cryptocurrencies ellaborated. Each node or computer storing a copy of the ledger shares and accepts this data structure, and it is crucial to the attractiveness and functionality of Bitcoin and other cryptocurrencies. An online ledger of all transactions is maintained using Blockchain technology, offering a secure data structure, which is shared and agreed across the whole network by a single computer or node. It is virtually impossible for transaction records to be written on the blockchain because every newly generated block must be verified by every node (Tu and Ju, 2019).
Several industry analysts think blockchain technology has considerable promise for online voting and crowd funding applications, while leading financial organizations like JPMorgan Chase (JPM) feel it has the ability to reduce transaction costs by simplifying the procedure.
Because cryptocurrencies are virtual and cannot be stored in a central database, a hard drive accident could result in a loss or destruction of digital cryptocurrency balances if a backup copy of the private key is not made. The resources and information you have control over are fully owned by you, and no central authorities, governments, or businesses have access to them (Uras and Ortu, 2021).
Cryptocurrency has been criticized extensively. Because cryptocurrency prices are determined by supply and demand, cryptocurrencies may fluctuate significantly in value when they are exchanged for other currencies. This is particularly relevant since many cryptocurrencies’ design ensures that they are extremely limited.
Value for Bitcoin has been rapidly increasing and declining, peaking to $17,738 per Bitcoin in December 2017, before falling to $7,575 in the following months, according to CoinDesk. Because of this, some economists see bitcoin as an inconsequential trend or speculative bubble that should fade fast.
There have been concerns that cryptocurrencies like Bitcoin are not based on actual things. There have been some studies that have claimed that Bitcoin’s market price is directly related to the cost of producing a bitcoin that takes up an increasing amount of energy, however, other research has shown that this is not the case.
Despite Bitcoin blockchains being secure, there is still a risk involved with other components of the cryptocurrency ecosystem, such as exchanges and wallets. The ten-year history of Bitcoin has been marked by multiple instances of hacking and theft, resulting in many millions of dollars’ worth of coins being stolen.
Some analysts, however, see the potential benefits of cryptocurrencies, such as protection from inflation, easy exchange, and simplicity of carrying and splitting them, as well as the ability to operate outside of central banks and governments.
What problems can crypto solves is an interesting question. Inflation, bubbles, bailouts, dubious rules, unjust practices, inequality, lack of transparency, poverty, the unbanked and more, is a fault of the present financial system. It’s a broken system for many with unfair advantages for a few. Coincidentally, these few are the ones opposed to change. What a surprise. One of the reasons Bitcoin was created is to provide a fairer system that does not depend on corrupt politicians, greedy bankers, or obsolete financial institutions. When money and power get concentrated in a few hands, bad things are bound to happen. Satoshi Nakamoto saw this during the 2008 crisis and decided to do something about it. Bitcoin fixes a lot of things. In addition to fixing corruption, theft, inflation, incompetence, inefficiency, speed, privacy, intermediaries, energy, and trust, it also streamlines processes and saves money. While the task seems daunting, the process should be straightforward since the bar was set so low to begin with. Since our current systems have been outdated, inefficient, and corrupt for decades, Nakamoto decided that he needed to take action (Cassidy, Cheng and Le, 2020).
Example of case study
An example and analysis of a failed case of cryptocurrency start-up is Dogecoin Crypto. Dogecoin is one of the cryptocurrencies which began without any pomp or strength. In reality, it seems the creator didn’t anticipate a lot of steam. However, the coin became very popular because of the type of philanthropic attitude it took. The cryptocurrency has a huge user base within no time and its own exchange has been set up. Unfortunately, the success was brief when its creator made an unexpected turn and turned the exchange down. Following the failure of the exchange and loss of money, the Dogecoin narrative came to an end.
When discussing the subject of cryptocurrencies, the primary topic seems to be the success of these alternative currencies. You will frequently learn about the most successful cryptocurrencies, including how digital currencies make online value feasible. There is an universe of cryptocurrencies which have certainly been brilliant and famous, but the unpredictable electronic currency market has barely survived as well. Most have failed because of bad advertising, security problems, unethical conduct and unclear development. These are the lesson which I learned from the case study (Cassidy, Cheng and Le, 2020).
Evaluation of hurdles as per case study
The cryptocurrencies market has dominated the broader market for the past decade. Dogecoin (the ‘people’s currency’), has delivered some of the most lofty returns in the cryptocurrency space despite Bitcoin tending to generate most of the press. Dogecoin achieved a return of 27,000% in just a 6-month span between early November and early May, more than the benchmark index, the S&P 500, has returned in the past 56 years, including dividends!
We are seeing the end of the Dogecoin dream unfortunately. On May 8 – the same day Elon Musk appeared on Saturday Night Live as a member of the Tesla team and a fan of Dogecoin – Dogecoin reached its peak at $0.74. Since then it has lost nearly three-quarters of its value. According to exchange rates on June 21, Dogecoin was selling for less than $0.17 per token.
This is either a healthy pullback or a fantastic buying opportunity, according to some observers. From my perspective, this implosion is a foregone conclusion. During Dogecoin’s hype-focused pump, there were a few key reasons why the project ended in a shambles. The number of businesses accepting Dogecoin is very small. Aside from its extreme limited usage in real life, Dogecoin is extremely controversial. According to online business directory Cryptwerk, Dogecoin can now be traded on Coinbase, but only around 1,400 mostly obscure companies accept it. There has been an eight-year wait for Dogecoin just to reach roughly 1,400 businesses. Those still thinking they will get in before widespread adoption forget that. The number of entrepreneurs globally is estimated at 582 million people (Afzal, 2019). Transactions on the blockchain are declining on a daily basis. Take a closer look at the number of transactions on the Dogecoin blockchain to see that its popularity has been grossly overhyped. In the trailing month, its blockchain has averaged only 28,000 to 35,000 transactions daily after averaging 35,000 to 55,000 between July 2020 and May 2021. Dogecoin’s usage is laughable, given that Visa can process approximately 24,000 transactions per second. In the crypto space, there are no entry barriers. In addition to the previous point, there are an endless supply of new cryptocurrencies and blockchain projects emerging regularly. The fact that Dogecoin’s barrier to entry is nonexistent in the digital currency space makes it a sitting duck because it lacks competitive advantages. We provide a few more reasons below for why dogecoin failed in 2019 (Afzal).
The transaction fees for this cryptocurrency are considerably higher than those of other popular cryptocurrencies. The Chinese government put a stop to it. Consequently, hodlers suffer constant devaluation. There is no decentralization in Dogecoin. Margins are a big problem. A bubble inevitably bursts. History demonstrates that bubbles eventually burst regardless of their size, regardless of how big they are. The adoption of a next-big-thing technology does not always match investors’ lofty expectations, no matter how enthusiastic the investors may be. Despite the potential of blockchain, many businesses are hesitant to switch away from their tried-and-true payment infrastructure. As a pump-and-dump-style bubble without any distinguishable competitive advantages, Dogecoin was doomed to fail.
Government initiatives and regulations
Given the new paradigms created by this technology, regulating and uniform sing procedures relating to the usage of cryptocurrencies present a major issue for government of every States and international organizations. In the capitalist system the distinctive features of cryptocurrencies, like the independence of every country, quickness in completing activities, mathematically issuing units of value, were never noticed at this level. The very unification of the means of payment, custody and wealth production, responsibilities formerly performed separately by several legal organizations, has been produced and still creates debate inside a single instrument. These require the organization and exercise of self-regulation in the usage of cryptocurrencies in the absence of State regulations so that these potential markets are not impacted adversely by the failure of the state.
Conclusion
This kind of market organization, through issuing state regulations locally or globally, may be accomplished by making international bodies’ suggestions. The unique features of this new technology, but also so that possible cryptocurrencies cannot be undermined by excessive regulation, must be taken into account in these suggestions. Given that the use of cryptocurrencies shares many similarities to banking activities, because it achieves the same effects, bank regulations may be used to verify how businesses and people use international trade cryptocurrencies, such as implementing compliance policies, customer background checks and other actions. However, given the worldwide uniformity of our knowledge of cryptocurrencies, the handling of this instrument should be confirmed in all the relevant countries (Fahy, Douglas and Erp, 2021).
Reference
Arikan, N.İ. (2020). AN OVERVIEW OF THE CRYPTOCURRENCIES; THE THEORY OF MONEY PERSPECTIVE. Malatya Turgut Özal Üniversitesi İşletme ve Yönetim Bilimleri Dergisi, 1(2), pp.147–165.
Keenan, A. (2020). Cryptocurrencies: An Overview and Financial Analysis for Inquiring Investment Professionals.
Hellwig, D., Karlic, G. and Huchzermeier, A. (2020). Cryptocurrencies. Build Your Own Blockchain, pp.29–51.
Tu, Z. and Ju, L. (2019). A Normative Dual-value Theory for Bitcoin and other Cryptocurrencies. arXiv:1904.05028.
Uras, N. and Ortu, M. (2021). Investigation of Blockchain Cryptocurrencies’ Price Movements Through Deep Learning: A Comparative Analysis.
Cassidy, J., Cheng, M.H.A. and Le, T. (2020). It’s a bird! It’s a plane! It’s a cryptocurrency! What’s that?: in search of a regulatory framework for cryptocurrencies. New Zealand Journal of Taxation Law and Policy, 26(3), pp.331–357.
Afzal, A. (2019). Cryptocurrencies, Blockchain and Regulation: A Review. THE LAHORE JOURNAL OF ECONOMICS, 24(1), pp.103–130.
Fahy, L., Douglas, S. and Erp, J. van (2021). Keeping up with cryptocurrencies: Technology and Regulation, 2021, pp.1–16.
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