The dynamic world of cryptocurrencies

Cryptocurrencies continually grab the headlines. In January, Bitcoin skyrocketed, causing great excitement among investors. In April, the British government formed a taskforce to investigate the possibility of a British cryptocurrency – «Britcoin» instead of Bitcoin. Everyone now wants to jump on the crypto bandwagon before it’s too late so that they too can exploit lucrative opportunities and play an active role in shaping new innovations.
 

Less restraints, more creative freedom

One of the fascinating aspects of cryptocurrencies and the blockchain technology which they are based on is the paradigm shift that they are bringing about. Cryptocurrencies develop decentrally, far removed from the traditionally established regulatory institutions, such as states and financial organizations. Rigid processes are set aside.

Everyone can join in. But to achieve this they need high-performance computers – the more powerful, the better. The digital currencies are mined and managed by the users themselves via a decentral network.

Mining guzzles energy – at the moment anyway

Whoever provides a crypto network with processing power earns a corresponding amount of units of currency, known as coins or tokens. However, mining with processing power consumes a great deal of energy.

Bitcoin is currently deemed to be the most energy-intensive currency there is. But this may change in the future. Some currencies already define other processes that need less processing power. According to experts, modifications such as this could also be implemented by other currencies, such as Bitcoin. This would reduce power consumption even further.

Up one minute, down the next...

Cryptocurrencies have been in existence for more than a decade. Although it is now possible to pay bills with cryptocurrencies in some cases, for example in web shops and in the occasional restaurant, digital currencies are still not an established means of payment everywhere. Some retailers are reluctant to accept crypto payments due to the lack of intrinsic value and official exchange rates. They are also put off by the unstable prices.

Significant exchange rate fluctuations make investing in digital currencies very unpredictable. Rates can skyrocket but they can also fall just as dramatically. The investment risk is therefore very difficult to gauge. Offers that are too attractive must be treated with caution; there have been numerous cases of attempted fraud.

To a large degree, the exchange rate fluctuations and the scams reflect the great interest in digital currencies and the prospects for future opportunities. The era of cryptocurrencies as an investment is therefore a long way from being over.

... but development is still forging ahead

Blockchain technology is still in its infancy and a lot of progress has been made since the emergence of Bitcoin. Some cryptocurrencies are now faster than Bitcoin and, in addition to transactions, some providers offer the exchange of «smart contracts». There are numerous applications for this technology that enables the secure, fast and also cost-effective transfer of sensitive data.

For example, a pilot program run by the United Nations’ World Food Program used the Ethereum cryptocurrency to distribute funds to refugees in camps via blockchain. The organization wanted to rule out corruption and ensure that its financial aid reached the refugees themselves. Retailers are also showing an interest in blockchain’s potential. They use it to optimize supply chains in order to distribute perishable foods more efficiently.

The long-established motto of «cash is King» is now outdated. In 2010, paying for a pizza delivery with Bitcoin was just an amusing anecdote. Now, not only crypto fans but also banks and states are interested in this innovative, emerging technology. Exciting times are to come!