Are cryptocurrencies really here to stay?
It’s a likely scenario, but a lot of things must fall into place VIEWPOINT
Much is been said and written about cryptocurrencies like Bitcoin. Lets look at the main attributes that make headlines for crypto-news. • Exponential growth: $1,000 to $11,000 from January 2017 to November 2017 (at the time of this writing). The sharp rise in the value of Bitcoin has made headlines everywhere
• Acceptance by financilal institutes: As reported by CNBC in October, Goldman Sachs is looking into a new operation for trading bitcoin and other digital currencies
• Acceptance of cryptocurrencies for online payments
This list is not exhaustive. There are many other right reasons for which Bitcoin and other cryptocurrencies have been in the news. What is difficult to understand is that why it will stay and how long we can count on a socalled virtual currency. We have relived real estate and dot-com depressions so we have reasons to be sceptical. The D-date for the cryptobubble to burst can’t be set. Here are few reasons why cryptocurrencies must stay. Payment through credit cards carry charges, bank transfers have charges and international money exchange transfers is also a full-fledged profit-making business. While the transfer of any currency attracts all or some of the above-mentioned charges, people can use a digital currency to transfer funds for a few pennies and bypass the costly foreign exchange services offered by banks and traditional payment processors. In an ET market report, a co-founder of a Bitcoin exchange estimates that moving only US-India exchanges transfer to cryptocurrencies can save $5 billion to $7 billion annually in remittance fees. One of the most prominent reasons that cryptocurrencies are not trusted is the threat of hacking. Loss of wallets is a much misunderstood concept that makes cryptocurrencies enigmatic and enchanting as well. The fear of losing our wallets doesn’t allow us to trust this online virtual currency. But I am sure people will understand blockchain soon and will learn how to protect themselves from hacks. I think a new industry will emerge to protect digital currencies and prevent the loss of wallets of digital currencies. The idea alone will elevate a new platform of products and services. We’ll soon see if cryptocurrencies become the most trusted facilitator. It wouldn’t be surprising if giants like Amazon, big banks or startups will find solutions to the threats. Since it is just the start of digital currencies, it is less stable than the real currencies. It is far less trusted than mature currencies like the dollar or euro. But in countries like Venezuela, Iran, Iraq or Yemen, inflation has grown exponentially since the beginning of the year. There, Bitcoin is in some ways is more stable than the national currency, so it’s no surprise Bitcoin use in Venezuela has grown nearly seven times since the beginning of the year. Transactions that China in remittance fees could be saved annually if US-India exchanges transfer to cryptocurrencies accepts in Bitcoin are also substantially big to count. Digital currencies are leading the charge toward disrupting the traditional way we transact. Users of cryptocurrencies are driven also by market transparency of digital currency. The public ledger is the source of truth for many users and creates this ultimate transparency. So the financial field will have to become more transparent as a result or watch digital currencies take over. The bubble may burst but I think it should come back to beat the negatives of traditional way of transacting. A decentralised financial system through cryptocurrencies will be simpler, with fewer layers of intermediation. With this new system, a cryptocurrency code sets the rules and network checks for compliance. Bank executives that abuse the system for personal financial will be eliminated from the distribution channel. This modified financial system can remove the banks as middlemen and empowers the people. Cryptocurrencies allow direct dealing of the money equivalent and hence it can gain more trust in due course of time. Digital currencies provide a compelling (and eventually secure) way of settling transactions in real time through distributed ledger technology. Bitcoin and other digital currencies could become a viable alternative to the debit card networks. This competition for payment volume will only benefit the end consumer, as it will drive down transaction pricing.
Bitcoin must stay; cryptocurrencies must grow in value as well as its understanding. The writer is an entrepreneur and financial planning consultant. Views expressed are her own and do not reflect the newspaper’s policy.