This is the second entry into the ‘Business Gentleman’ series which will consist of reporting relating to business. The first entry can be seen here. The next several entries will focus on the future of cryptocurrency.
What Is Cryptocurrency?
Satoshi Nakamoto created Bitcoin in late 2008 with the envision of it becoming a peer-to-peer electronic cash system. In actuality, Nakamoto created a decentralized digital currency to compete against fiat currencies. How cryptocurrency operates in relation to fiat currency is simply explained:
If you take away all the noise around cryptocurrencies and reduce it to a simple definition, you find it to be just limited entries in a database no one can change without fulfilling specific conditions. This may seem ordinary, but, believe it or not: this is exactly how you can define a currency.Take the money on your bank account: What is it more than entries in a database that can only be changed under specific conditions? You can even take physical coins and notes: What are they else than limited entries in a public physical database that can only be changed if you match the condition than you physically own the coins and notes? Money is all about a verified entry in some kind of database of accounts, balances, and transactions.
Bitcoin Challenges
While cryptocurrency represent a paradigm shift away from centralized fiat currencies, there has been little interest in consumers and merchants to accept Bitcoin as a possible alternative. The surging costs of cryptocurrency has been caused by market speculation, instead of widespread adoption of these currencies into the marketplace.
Currently, there are approximately 355 live websites around the world which use the BitPay processor - which allows consumers to use Bitcoin as a payment form. In comparison, approximately 790,000 websites are using PayPal as a payment form. Therefore, there is little incentive for individuals to purchase Bitcoin from an exchange or engage in expensive mining practices.
Bitcoin has also developed a tainted reputation over the past decade. Hackers have stolen millions of dollars worth a Bitcoin (taking advantage of Bitcoin transactions not being reversible) and asked for the cryptocurrency as ransom after attacking Los Angeles Valley College earlier this year. Francisco C. Rodriguez, the Los Angeles Community College district chancellor explained the situation:
In consultation with district and college leadership, outside cybersecurity experts and law enforcement, a payment of $28,000 was made by the District, it was the assessment of our outside cybersecurity experts that making a payment would offer an extremely high probability of restoring access to the affected systems, while failure to pay would virtually guarantee that data would be lost.
Also, despite Bitcoin being developed as an alternative to the central banking system - the currency has itself turned into a centralized wealth transfer system. Early adopters to Bitcoin and those with resources to dedicate numerous computers to mining efforts are those who are profiting from speculation.
Bitcoin distribution chart showing 2 address own more Bitcoin than 90% of total addresses as of December 14, 2017.
The current unequal distribution of wealth among Bitcoin owners is worse than the income gap with fiat currencies. This makes the complete assimilation of Bitcoin into the marketplace being nearly impossible, as it isn't offering anything different than traditional currency at this point.
New Alternatives
Throughout 2017, a number of Initial coin offering (ICO) cryptocurrency opportunities hit the market. An ICO is a way startup cryptocurrencies crowdfund their currency, with ownership opportunities for those who buy in at an early stage.
These new currencies are set to challenge Bitcoin, Ripple, Litecoin, and Ethereum - hopefully becoming more integrated into the transaction and not speculation market. TRON, founded by Pennsylvania University graduate Justin Sun created blockchain network which supports contract systems like Bitcoin and Ethereum allowing for an entertainment-based ecosystem allowing creators to develop games for users of TRON.
Other options allow for users to use cryptocurrency to purchase supplements, help refugees, and build decentralized currencies to send money to those in need.
These technologies also allow for identification information to be stored, vital for those who have been displaced and may have any of their physical forms of ID available to them.
To keep up with Walter’s journalism you can follow him @GentlemansHall on Twitter