Introduction
Cryptocurrency has evolved in a big way in the financial world in the recent past and has taken it by storm. Cryptocurrency which began as an experimental idea has now the potential to change the global outlook of the financial system of the world. The freedom, ease, and trust associated with crypto transactions can literally change the way the world does business and financial transactions. This article attempts to look into the beginning, growth, and impact of cryptocurrency.
Origin and Rise of Cryptocurrency
The story of cryptocurrency began in the year 2009 with the release of Bitcoin as the world’s first decentralized digital currency based on blockchain technology.
The white paper on Bitcoin released by it’s founder, who goes by the pseudonym Satoshi Nakamoto was titled “ Bitcoin: A Peer-to-Peer Electronic Cash System “ and it explained how a cryptocurrency can operate without the need for intermediaries like banks or governments. Blockchain technology is central to the rise of cryptocurrency.
A blockchain is a decentralized and steadfast register that records all transactions across a network of computers. Blockchain technology puts an end to the need for intermediaries such as central banks, making transactions more secure, fast, and easy.
Blockchain technology has a lot more applications beyond cryptocurrency such as voting systems and supply chain management to name a few. The birth of Bitcoin in 2009 was like the opening of the gates of the cryptocurrency revolution.
In its early days, Bitcoin faced a lot of skepticism and mistrust. People were confused about its legitimacy and operational procedure.
But slowly due to the farsightedness of it’s enthusiasts a small group started to trade and use it. Bitcoin’s rise from being valued at nothing to $1000 per coin in 2013 led to the attention of global investors leading to the birth of various other alternative cryptocurrencies and blockchain projects.
Bitcoin opened the way for many alternative cryptocurrencies, each with its unique features and possibilities. Some like Ethereum introduced the concept of smart contracts while some like Ripple aimed at low-cost payments across borders and while some like Litecoin focussed on fast confirmation of transaction time.
The cryptocurrency world also witnessed the rapid rise of Initial Coin Offerings (ICOs). Which is a fundraising method whereby new cryptocurrencies are sold to global investors raising substantial capital for blockchain projects.
But this also led to some scams and other scandals. As a result, governments and other regulatory bodies around the world started to begin to implement measures in order to protect the interests of investors.
Impact on Financial Services:
The rise of cryptocurrency has had a deep impact on financial services around the world. Some of the key effects can be summarised as follows:
- Decentralized Finance or DeFi platforms use blockchain technology without traditional governance to offer financial services. Clients can loan, trade, and earn interest on cryptocurrencies.
- Cryptocurrency Exchanges have come up with the rise of cryptocurrency. Cryptocurrency exchanges have made it easier and more comfortable for clients to buy, sell, and trade digital assets.
- Cryptocurrency-related services offered by major banks and investment firms to their clients and the investment in digital assets by financial institutions themselves.
Central Bank Digital Currency CBDC which is a digital version of a country’s currency is being considered by many countries globally. This can potentially lead to more secure and efficient payment systems reshaping financial policies.
Challenges and Trepedations associated with cryptocurrency
The impressive rise of cryptocurrency has given rise to some challenges and apprehensions:
- Cryptocurrencies are known for their price volatility thus making them a risky investment.
- Regulations governing the digital landscape are not uniform across the countries and this leads to uncertainty and apprehensions for individuals and businesses.
- Cryptocurrency exchanges and wallets are vulnerable to fraud which can eventually lead to huge losses to their clients.
- There are environmental concerns regarding the mining of crypto coins.
From its humble origins to its rise, the journey of cryptocurrency has been remarkable. From the early days of Bitcoin to the intricate and myriad ecosystem of digital assets of today cryptocurrency has come a long way challenging the traditional financial systems of the world.
The future belongs to blockchain and cryptocurrency if the governments and the financial institutions of the world can ensure uniform and appropriate checks and balances to safeguard the interests of individuals and businesses.