The Future of Cryptocurrencies
Jarett Fickbohm Jonathan Kitchin ENG 221 April 1 2019
Abstract: The growth of cryptocurrencies has been surprising growing and becoming successful over the past years. I believe that in the near future, cryptocurrencies will become the new currency in the world. We live in a world of e-commerce and more consumers are buying from the comfort of their home. Also, how e-commerce transforming into c-commerce, c standing for crypto, this would make the buying and selling process much smoother. The growth of cryptocurrency goes hand in hand with the growth of technology, and there are three predictions for cryptocurrency in the future. Having crypto will also help the accountability and transparency, where transactions can be properly tracked and recorded. The world is moving much quicker than we think and the future of our currency is a major topic that needs to be looked at. Money makes the economy stable, run smoothly, and helps people out, and cryptocurrencies could possibly change all of that for the better. Introduction: Some skeptics believe that cryptocurrencies’ will die off and will never reach the mainstream of our society. Bitcoin and other cryptocurrencies’ have been around for about ten years now and from that there has been a huge increase in the usage of crypto. One of the most important topics before diving into this research paper is understanding what exactly are cryptocurrencies. Since this is a newer topic that is being talked about in the financial world most regular consumers do not fully understand what crypto is and how it works. Seeing that crypto is a newer topic, there are many predictions that are made for the future of crypto. No one completely understands but I will be discussing three major predictions that I have learned while researching. Also with that I will be discussing the meaning of e-commerce and what effect that has on cryptocurrencies’ future. There are many pros and cons that come with cryptocurrencies too, and that topic will be discussed in this paper. What is Crypto: Bitcoin, a type of cryptocurrency, and all other altcoins are virtual currencies that are exchanged by groups of individuals. As of today, cryptocurrencies are considered alternative currency, because the government cannot regulate them. According to Brian Martucci, who writes about frugal writing, entrepreneurship, and innovative ideas, talks about the history and what exactly are cryptocurrencies. Martucci states that “cryptocurrencies use cryptographic protocols, or extremely complex code systems that encrypt sensitive data transfers, to secure their units of exchange.” These protocols were founded on mathematics and computer engineering principles, meaning that cryptocurrencies are a very difficult to trace back to an individual, and making them very hard to break. Most people do not really understand how crypto work, because the codes that are encrypted are highly complex. There are many different things that go into how this all works. These concepts include: Blockchain, Private Keys, Wallets, Miners and Finite Supply. There is a lot of concepts, mathematics and engineering that go into making sire cryptocurrencies work properly and efficiently. Predictions on Crypto: Cryptocurrency has made a massive statement in the financial world, and has affected many people’s lives as well. The growth of cryptocurrency goes hand in hand with the growth of technology. In the article, “A Look into the Future of Cryptocurrencies” by Toby Nwazor it talks about the three predictions for cryptocurrency in the future. Nwazor states that the predictions are: “Cryptocurrencies will receive more patronage from institutional investors, why cryptocurrencies are being regulated, and finally cryptocurrencies will not stop being volatile. On the first prediction, with added precautions investors have less stress and disbelief of the cryptocurrencies. This means that more investors are likely to invest because they are thinking that cryptocurrencies are a viable asset. The second prediction states why cryptocurrencies are being regulated. There is a lot of concern on crypto and wondering if there is enough security. As of now there are hardly any regulations on crypto making it easy to use on buying illegal assets or using it in the dark web. There will be more regulations that appear as cryptocurrencies become more popular. The last prediction is that crypto will not stop being volatile. In the words of Nwazor “there are still so many factors keeping them volatile. These include: the currencies’ lack of intrinsic values, the lack of institutional capital, the implementation of regulations and then-order books.” There are many things that help lower cryptocurrencies’ volatility, but all of those things combined would make a difference in the crypto volatile nature. There is still so much that needs to be learned and discovered about cryptocurrencies’, and from there we as a society can understand how they are used and how they work. There are so many predictions that can be made on crypto because it is such a new topic for people to comprehend. Why E-Commerce is the Answer: In the article, “The Future of Cryptocurrency: Why E-Commerce Is the Answer” the author Randall Stephens talk about the effect of cryptocurrency and the possible effects to the future of currency. With Bitcoin being introduced about ten years ago, it has grown and become more popular. According to Stephens “CoinMap about 14,418 venues around the world are now using and accepting Bitcoin and other altcoins.” With only fourteen thousand it is not enough to switch to strictly crypto, but this does show that the growth of crypto is increasing year by year and shows that possibly in the future there will be a strictly crypto society. The best way to use crypto is through e-commerce, which is growing every single day. The amount of people who buy an item online has increased over the year and is going to continue to grow in the future. People are buying more from the comfort of their homes to avoid going to retail stores. The sales in retail e-commerce worldwide” In 2017, retail e-commerce sales worldwide amounted to US $2.3 trillion, and e-retail revenues are projected to grow to US $4.88 trillion by 2021” according to Stephens. Right now, banks are financial intermediates between sellers and buyers, which means they can charge fees, and can cause problems when trying to purchase an asset. Again in 2017 Stephens states “e-retail sales accounted for 10.2 percent of all retail sales worldwide… e-retail is expected to reach 17.5 percent by 2021.” This is a huge number of sales that are done online, which makes buying with crypto a much easier process. With the cryptocurrency growing the goal is to replace banks, eliminating the middle man, making the shopping process much simpler and reducing fees that banks address. This article also addresses e-commerce transforming into c-commerce, c standing for crypto. This would mean that transactions that are done online would strictly use cryptocurrencies, eliminating financial intermediaries. This would make the buying and selling process much smoother for the consumer, and would help grow the usage of crypto. Advantages and Disadvantages of Crypto: In the article, “What Is Cryptocurrency - How It Works, History & Bitcoin Alternatives” by Martucci he states that there are seven advantages and seven disadvantages of cryptocurrencies. The seven advantages that Martucci stated are: “built-in scarcity may support value, loosening of government currency monopolies, self-interested and self-policing communities, robust privacy protections, harder for government to exact financial retribution, generally cheaper than traditional electronic transactions, and fewer barriers and cost to international transactions.” These are major advantages that consumers see with cryptocurrencies, now let’s dive into them. The first advantages that Martucci talks about is built-in scarcity. Most cryptocurrencies were developed on scarcity, meaning that owning such crypto is just like owning a precious metal. This means that more people would be more likely to buy crypto because they are valued more than normal currency. Another advantage is that cryptocurrencies have robust privacy protections. This was a major concern for the developers of cryptocurrencies, making sure that privacy and anonymity was on the top of the list. This insures the consumers who utilize crypto are unconnected to any of the information or transactions that identify them. Another advantage is that there are fewer barriers and costs to international transactions. “Cryptocurrencies don’t treat international transaction any differently than domestic transactions” stated by Martucci. This is a huge advantage for international transactions because they do not involve any special fees that some domestic transactions have. This could make trading and borrowing from other countries a much easier and cheaper option. There are so many advantages that cryptocurrencies have, and with these advantages this can increase the usage and overall growth of cryptocurrencies. The seven disadvantages that Martucci stated are: “lack of regulation facilitates black market activity, potential for tac evasion in some jurisdictions, potential for financial loos due to data loss, potential for high price volatility and manipulation, often can’t be exchanged for Fiat currency, limited to no facility for chargebacks or refunds, and adverse environmental impacts of cryptocurrency mining.” Some consumers may be scared or intimidated because of these disadvantages. To the first disadvantage, the lack of regulation facilitates black market activity. One of the biggest deservingness that consumers see is that cryptocurrency is used to purchase illegal assets on the black market. Many of the black-market sellers will only use Bitcoin or another altcoin. Another disadvantage is that crypto cannot be exchanged for fiat currency. Once you have crypto it is very hard to convert it into non-digital currency, and the if you are successful there are often time exchange cost. Again, there are many different disadvantages when it comes to crypto, and with is being so new the disadvantages may over power the advantages. There are many more advantages and disadvantages when it comes to cryptocurrencies, but in the future, there will be more regulations, more venues will be using crypto, and more people are buying from e-commerce which is foreseeable to transform into c-commerce. Conclusion: As you know the growth of cryptocurrencies are increasing each year, and more vendors are accepting and using crypto. Crypto is still a newer topic in the business field and there are many predictions that come with this as well. Cryptocurrencies are working to transform the way we use money. After conducting my research, I can say there are many advantages and disadvantages that come with crypto, and with that some consumers are concerned in using it. E-commerce is dominating the market and with that more it is more likely for crypto to utilized. With all of these findings there is a future with the usage of cryptocurrencies, and it could make the buying and selling process simpler and much easier.