Objectively, cryptocurrencies are not necessary because government-backed currencies function adequately. Unlike traditional currency, they are not issued by a central authority and are not considered legal tender.Īt this point, use of cryptocurrencies is largely limited to “early adopters.” For scale, there are around 10 million Bitcoin holders worldwide, with around half holding Bitcoin purely for investment purposes. They possess no intrinsic value in that they are not redeemable for another commodity, such as gold. Cryptocurrencies are primarily used to buy and sell goods and services, though some newer cryptocurrencies also function to provide a set of rules or obligations for its holders-something we will discuss later. What Is a Cryptocurrency and Why Use It?Ĭryptocurrencies are digital assets that use cryptography, an encryption technique, for security. It will also examine the outstanding issues surrounding the space, including their evolving accounting and regulatory treatment. This article will attempt to demystify cryptocurrencies’ appeal, its complex underlying technology, and why a purely digital currency is able to have value. At their simplest, they are merely the newest fintech fad yet at the most complex level, they’re a revolutionary technology challenging the political, economic, and social underpinnings of society. While critics including economist Paul Krugman and Warren Buffet have called Bitcoin “ evil” and a “ mirage,” others, such as venture capitalist Marc Andreessen, tout them as “ the next internet.” For every person declaring that cryptocurrencies are in a bubble, there’s another insisting that they are the next wave of the democratization of finance. With that said, cryptocurrencies remain controversial.

The technology underlying cryptocurrencies has been said to have powerful applications in various sectors ranging from healthcare to media. The cryptocurrency market cap has been projected to reach as high as $1-2 trillion in 2018. Originally known for their reputation as havens for criminals and money launderers, cryptocurrencies have come a long way-with regards to both technological advancement and popularity. Perhaps we could put it as simply as Stephen Colbert does below, but we’ll be a tad more precise.

Despite the buzz, the meanings of these terms still elude many people’s comprehension.

As you’ve no doubt noticed, cryptocurrencies (and their corresponding jargon) have caused quite the uproar in the media, online forums, and perhaps even in your dinnertime conversations.

The FTC recorded an increase in identity fraud complaints of more than 100% between 20, and Coinbase, the largest US-based exchange, saw account hacking double just between November and December 2016.īitcoin, blockchain, initial coin offerings, ether, exchanges. In Asia, where cryptocurrency demand has been soaring, the Chinese and South Korean governments have taken hard stances on cryptocurrency regulation. As of mid-2017, only three BitLicenses have been issued, and a far greater number withdrawn or denied. New York State created the BitLicense system, mandates for companies before conducting business with New York residents. While the US has been cracking down on unregulated activities, in countries such as Germany and the UK, cryptocurrencies are treated like 'private money' and are not subject to tax outside of commercial use.

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