The future of cryptocurrency is likely to continue on its current path, but it has become more regulated and could face difficulties in the coming years. While regulation may still be a major concern for cryptocurrencies, regulators are trying their best to keep an eye on them as well. In this article we will explore what is expected from blockchain technology over the next few years and how some of that can have ramifications for financial products and services.
In the early 2010s, bitcoin was created as an alternative to traditional currency and was one of the first coins to gain popularity. As other cryptos exploded throughout 2012, Bitcoin’s price increased by a factor of 1000. Since then this digital currency has gained notoriety for being decentralized. A decentralized network consists of nodes which hold bitcoins while they mine bitcoins. After receiving the miner rewards, the miners send them to another node or receive them directly once their fees are paid. Another reason why bitcoin is considered so unique is due to its scarcity. Unlike most cryptocurrencies, there are virtually no second or third party transactions to take place with bitcoin. Because bitcoin cannot be altered through hacks, people who wish to mine bitcoin must pay the highest possible fee to do so and it is usually quite complex.
Bitcoin (BTC), otherwise known as Blockchain Technology, is a type of computer software program designed to make virtual currencies such as Bitcoins possible. Its main purpose is to create secure networks like those used in peer-to-peer payments. Today, it is used in many industries and acts as an alternative payment method for electronic commerce. It is also used in online games, trading platforms, and banks. One would assume that blockchains will soon replace fiat money due to their security and ability to track consumer behavior like crypto wallets do. However, this statement is yet to be made and there are many factors that should be taken into consideration before any change is implemented.
Most of the reasons why cryptocurrencies will eventually replace fiat money or traditional finance come down to two key points: efficiency and transparency. With both of these elements in mind, it is difficult to imagine a world where “Bitcoin is king” as more and more industries and businesses are integrating blockchain technology. We currently see applications for cryptocurrencies in various sectors including travel, entertainment, insurance, healthcare, gaming, banking, education, government agencies, and even in non-profit organizations.
Regulators are attempting to regulate what is referred to as ‘cryptoassets.” This includes everything including, the company tokens like BitCoin and DAI (Decentralized Autonomous Intelligent) systems, stablecoins, NFTs as well as new tokens created by governments that represent valuable real-world assets, all of whom are often associated with large companies. For example, Facebook recently launched NFTs using their logo, Meta says they are working to launch a version with “a better design and feel.” Even though there is not much legislation written for NFTs, it does increase the potential for regulation because of the number of projects involved. Not only has NFTs generated controversy, but it is important to note that many countries ban the sale of NFTs due to national laws and policies. Recently, Canada has announced that illegal sales of NFTs will now need a special permit even if they contain intellectual property rights. To put things into perspective, the U.S., Australia, South Korea, Singapore, France, etc. all have had bans on NFT marketplaces since 2017. Some states such as China prohibit certain types of content, others tax NFTs, and others allow or encourage artists to list their artwork on NFT sites. These restrictions vary based on local regulations and political power. Countries such as New Zealand, Malaysia, Taiwan, Israel, Poland, Germany, Estonia, Slovakia, and Austria have either banned or are considering banning specific NFT websites. There are many examples like this that show that authorities have been aware of the potential harms and risks of cryptocurrencies and are taking action against anyone found breaking the law. So far however, I would say that regulatory bodies have not been able to establish effective regulation for NFTs or similar projects. However, this does make me hopeful for the future of cryptocurrencies. If anything, the continued rise of big tech companies creating massive sums of wealth in the form of cryptoassets will lead to greater demand for these programs, thus creating further positive ripple effects.
Despite these challenges to the future of cryptocurrencies, the long-term trend remains upwards. Many believe that cryptocurrencies will replace centralized institutions such as central banks. Most of these predictions have centered around the idea that cryptocurrency prices will fall to zero. Although blockchain technology has existed for decades, it wasn’t until 2015 when Bitcoin broke the $100-$200 barrier; however, in recent months it has broken past that and is continuing to move steadily upward. By 2020, BTC was nearing $2,000 per coin and has made strides ever since. The fact that it is increasing at this rate makes me extremely optimistic about the direction the industry is headed in. The more adoption comes to light, the higher rates of return can happen. And, most importantly, it takes innovation to get there. Ultimately, although cryptocurrency markets and the entire industry might seem daunting, it doesn’t mean that there is nothing good to come out of it. Just look at Starbucks (Starbucks Corp.) with its partnership with Ripple. Their collaboration helps solve problems between bank transfers and payment processing companies such as PayPal. They allow Starbucks to process business without having to go through banks to set up account holders. Eventually, it will be normal to use your debit card at Starbucks instead of the banking system. Therefore, as long as innovations such as Coinbase continue to thrive and continue growing the overall market, I believe we will see cryptoasset prices rising in line with the US dollar.