This article is a logical sequel to our previous one about blockchain. You most likely have heard of Bitcoin, more often labelled as BTC in the world of cryptocurrencies, but do you know what it really means?
According to ING, “51% of the Belgians do not have general knowledge of bitcoin and the many other existing cryptocurrencies.” More than 70% of them cannot fathom receiving their salaries in this type of digital currency. Therefore, it is undeniable to state that our country is not very much inclined to switch monetary basis. However, this does not stop a minority of the Belgians from considering cryptocurrencies as sustainable investment (16%) or even as the future online payment method (15%). How come these unwavering optimists are ready to bet on this new model?
Bitcoin obviously created numerous millionaires in the past few years. One counts more than 17,000 wallets valued over €1 million in BTC. However, there is no way to tell how many investors lost everything. In addition to making money, there are other reasons to adopt cryptocurrencies. First of all, they work without intermediaries: States, banks and other traditional financial links do not influence transactions in cryptocurrencies.
Secondly, exchange charges are irrelevant since crypto-assets are worth the same everywhere in the world. There are hence no exchange fees when converting from one currency to another.
Moreover, an Internet connection is all what one needs to make a transaction. All operations are handled confidentially.
Yet this technology also displays a few drawbacks. It is quite energy-intensive though the newer cryptocurrencies are anchored in the cloud. Most of them, the ones which are very common, are not. Besides, cryptocurrencies can be subject to mistakes and piracy. While on paper it is virtually impossible to hack a cryptocurrency, reality shows us evidence to the contrary. There is no way to prevent all human failures. In some countries, insurance contracts can be taken up in this regard.
The unpredictable character of cryptocurrencies cannot be overlooked. Some of them have already lost 20% of their value in a few minutes. Others simply collapsed without ever taking off again, leading to a market capitalisation of zero.
Who knows, a virtual currency could play the role of complementary currency and call into question the purpose of banking systems as we know them. After causing a revolution in the press, trade, music and cinema, Internet could trigger significant changes in the banking sector’s environment.