The topic of cryptocurrency is one that polarizes opinion. There are some who see it as nothing more nor less than a form of investment, like a commodity to be bought and sold as the price fluctuates. Others feel that crypto is far more and that as adoption increases, it will change the way we think about money forever. Being both globals in digital in nature, it certainly ticks the right boxes for our 21st-century lives, both from a personal and a commercial perspective.
For most of us, however, there are more fundamental questions at work. Up till now, the dramatic volatility of Bitcoin has given it the reputation of a lion with a toothache. Something you avoid going anywhere near unless either you really know what you are doing or you are extremely foolhardy. However, there is also a school of thought that crypto is about to break free of the initial "boom and bust" phase and enter a period of serious and sustained growth.
It is a phenomenon we have seen before with digital tech. Before the online revolution that we see today, there was the dotcom bubble. And while social media is now taking over the world, before we had Facebook, we had the boom and bust of Friends Reunited and Myspace.
Cryptocurrency essentials
Currencies like Bitcoin, and more recently Ethereum, Litecoin and others are constantly in the news, but when something only exists in the digital space it is not always easy to conceptualize. There are numerous online resources that go into detail about how cryptocurrency works , but perhaps the most important points to keep in mind are how it differs from traditional currencies like the dollar or euro.
A cryptocurrency is transferred directly from peer to peer; there is no bank to act as a "middleman." This means transactions are quicker, simpler and cheaper to complete. Every transaction is recorded on a public ledger called a blockchain, and these ledgers are decentralized across a virtual network in cyberspace.
Transactions are made by sending funds from one online wallet to another. In this respect, it is similar to using an online account like PayPal. The difference is that there is no physical currency involved.
How has cryptocurrency evolved?
It is 10 years since the mysterious Satoshi Nakamoto published that would change our conception of money forever. Yet at the time, it was only read by a handful of people in the cypherpunk community, and to this day, the true identity of Nakamoto remains . The first bitcoins were mined and registered on the blockchain in 2009, but over the first couple of years, nobody tried to sell or trade one, so there was no yardstick by which to assign a value against traditional currencies.
All that changed in 2010, when in 2010, Laszlo Hanyecz, the same developer who claimed to have exchanged hundreds of emails with Nakamoto, conducted the first-ever Bitcoin transaction. Legend has it that he exchanged 10,000 bitcoins for two pizzas. At today's prices, those bitcoins would be worth about $70 million.
This was the start of a rollercoaster ride for Bitcoin that made it an almost hypnotic temptation for investors. The volatility was such that it was possible to make millions overnight - but of course, the values were equally likely to tank, meaning the speculator lost everything.
Beyond Bitcoin
It wasn't long before other cryptocurrencies started to appear on the scene. Litecoin was one of the first to emerge, but it is Ethereum that has come closest to truly challenge Bitcoin as the gold standard in crypto. The parallels with social media are apparent. Bitcoin was the first, and captured the imagination, but has limitations, the biggest of which is scalability. Only a certain number of bitcoins can ever go into circulation, so can it really represent the global currency of the future?
Ethereum started to attract serious attention in 2016. It's creator, Vitalik Buterin, has more than a little of the Mark Zuckerberg about him, and the sharding technology used in mining goes a long way towards addressing the scalability issues.
There can be little doubt that crypto will ultimately achieve mainstream adoption as the technology continues to mature and the growth rate evolves from bubble to boom . The real question, though, is whether it will be in the form of Bitcoin, Ethereum or some new cryptocurrency that is still waiting to be revealed.
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