In the mid-1980s, the advent of e-mail revolutionized traditional means of communication while at the same time making the post, fax and telegram obsolete. Today, Gmail, Hotmail and other email services are part of our daily lives: no one is surprised to receive an email from around the world in the same second. Can we expect the same from cryptocurrencies? Will they ultimately revolutionize the foreign exchange market, traditional banking systems and payment methods? Who will be the main character? Private networks like Bitcoin? New banking problems? What role will the central banks play? The only certainty is that no credible player can turn their backs on the emergence of this digital technology, which makes it possible to both manage financial transactions and make money independently of the authorities.
Crypto for Dummies: How Does It Work?
A cryptocurrency is a digital and virtual currency used for financial transactions between users and members of the same network. Cryptocurrencies are not issued by government agencies such as central banks. They enable transactions without going through the current banking system. Cryptocurrency users can pay instantly or transfer to one or more correspondents around the world. Transactions are grouped in blocks, validated and recorded in a central file called the blockchain. Transactions and the central file use complex validation algorithms that represent a security guarantee. The user identifies himself using a key pair, a public and a private key, the encryption of which enables secure authentication and guarantees anonymity.
Cryptocurrencies are largely private initiatives, of which Bitcoin is the most emblematic today. With 50 million users, mostly in the US, Bitcoin continues to grow geographically around the world.
The most emblematic cryptocurrencies
Bitcoin, a pioneer in cryptocurrencies, was founded in 2009 and is still the most widely used digital currency to this day. The number of bitcoins is ultimately limited to 21 million units (divisible into decimal places). There are currently 18.4 million in circulation, which based on the current unit value (+/- $ 11,500 per Bitcoin) equates to a market capitalization of $ 210 billion. There is nothing that could destabilize the world economy, but this figure should not be neglected: we are close to the level of the Belgian national budget. The market authorities do not recognize Bitcoin as a currency, but as an active crypto, the value of which enables trading.
The Ethereum network and its unit of currency, ether, are the second most widely used cryptocurrency. Ethereum is primarily positioned as a common platform for
multiple cryptocurrencies by offering their codes and technology to new entrants. When the technological barrier is removed, the doors are open to several private initiatives. To date, there are more than 1,500 cryptocurrencies using this common platform.
The Libra (Facebook coin) is a current Facebook initiative in cooperation with 28 players from the financial and digital world. The interest in digital currencies has not escaped GAFAM since the development of the concept of a network of users who share a common currency. So far, no currency can be used by more than 2 billion people represented by the Facebook community. In contrast to its predecessors, the value of the scales is covered by a basket of 5 international currencies. Its course should therefore be fairly stable: we speak of a « stable coin ». The emergence of this new global currency has led to the awakening of the financial authorities and central banks around the world who are currently responsible for delimiting the initiative from Facebook or, in their opinion, hindering it. .
Properties of cryptocurrencies
To this day, cryptocurrencies are independent of international political and monetary bodies. Their monetary value is determined on the basis of the economic value depending on the supply and demand for that currency. The system offers a high level of transparency, which guarantees the quantity and integrity of the cryptocurrencies in circulation. Those who are more convinced will let you know about the emergence of a new « digital standard » (like the gold standard). More liberal minds will remind you that the price of traditional currencies is manipulated by the central banks. through changes in interest rates.
The fees associated with crypto transactions are significantly lower than traditional banking fees. According to a study by the World Bank, the average fees for international transfers today are 7% of the amount and should be in the range of decimal places for cryptocurrencies. The same applies to debit cards and credit cards, the respective fees of which are 1% and 3%. Bitcoin users also have the option of paying « voluntary » fees in order to expedite the processing of their transaction.
Transaction security is the basis of all cryptocurrency: it is guaranteed by the architecture of the blockchain, which is decentralized and replicated at 9,000 different locations (nodes). Greedy hackers or state hackers: everyone has broken their teeth. The security gap in the system lies more in the access platforms with which you can manage your wallet: the digital safe protects you from malicious people.
Cryptocurrencies are an anonymous payment instrument and have long been the preferred refuge for hidden financial flows, which are summarized under the term « dark network ». Mafia, drugs and human trafficking of all kinds have found favorable competitive conditions there. Today, the user community concerned about this discrepancy supports the implementation of controls on currency movements (buying / selling bitcoin) to avoid money laundering.
Financial instrument or speculative asset
The value of a cryptocurrency, and especially Bitcoin, fluctuates against currencies. Their value is determined by supply and demand in the foreign exchange market. Knowing that the amount of money available is strictly controlled by the algorithm and limited over time, any increase in demand for this currency will lead to an increase in value. With success, Bitcoin recorded spectacular growth in value, multiplying its value by a factor of 100,000 in 10 years (0.1 USD / BTC in 2010 -> 10,000 USD / BTC in 2020). Not everyone got richer because the road was turbulent, one up and one down: buyers of Bitcoin in 2018 priced at $ 19,000 / BTC are still paying the price for this extreme volatility. According to Jonathan Gross (1), volatility is a disease in its infancy: « The growth in user numbers and the atomization of the market will ultimately mitigate the impact of large-scale owners. » Nowadays, Bitcoin is essentially an investment asset: investors buy, portray and speculate upwards. We are therefore talking about active crypto. In order to become a real means of payment one day, cryptocurrencies have to give up this speculative side, assert themselves as an economic instrument and stabilize their exchange rate like the Libra project.
A jump into the heart of mining technology (2)
« Minors » are private companies that are responsible for tracking transactions (data mining), processing them and updating the central file. Several thousand companies and several million computers compete with one another and therefore work simultaneously on the algorithmic resolution of the same blocks of transactions. You will not be compensated through transaction fees, but through the creation of new bitcoins. Welcome to the unfriendly world of mining! With regard to computing power, storage capacity and cooling of processing units, these processes are terribly energy-consuming or, more precisely, « aid digestion ». The vast majority of these companies are located in China and Georgia near the power generation centers at prices three to five times lower than in our countries. The consumption estimates are around 40 terawatts / h per year (3) or half of the annual Belgian electricity consumption. 30% of the energy consumed is renewable, mainly of hydraulic origin. This excess energy isn’t limited to a digital currency or blockchain technology. It is part of the decentralized validation mechanism for Bitcoin and the competition between millions of computers working on the same transactions. This is also the actual limit of the system, as it is inconceivable to develop a digital currency on a larger scale according to the same principles. New validation processes that use much less energy are under development and should support the emergence of new digital currencies.
Cryptocurrencies, banks and the central bank?
Asking the question means trying to understand the impact cryptocurrencies have on the existing banking system. Cryptocurrencies have the potential to share the cost and time of
very significant financial transactions; As such, these new platforms are positioning themselves as competitors to banks and credit card companies. However, the banks themselves have understood very well the potential of blockchain technology to secure access, reduce fraud, facilitate international transfers, simplify interbank clearing, and reduce infrastructure costs. They need to rethink and dust off their job depending on how they integrate this technological revolution into their activities.
The potential of crypto currencies is not lost even with the central banks. Central banks originally viewed cryptocurrencies as a far-fetched initiative that would choke on its own volatility. Today, however, digital currencies have the ability to create money and circulate new currencies, an exclusive and historic prerogative of central banks. The control of money supply through interest rates and bank reserve ratios may need to incorporate a new external source of money. The European Central Bank understood the challenge well by examining a digital euro (4) that correlates with the monetary euro. China is the most advanced country in this field. China’s central bank is partnering with web giants Alibaba and Tencent to create the world’s first state-owned cryptocurrency (digital yuan). Countries like Russia, Japan and Sweden have already entered the test phase.
Which currency for which future?
The development of society creates an environment that is favorable for the development of digital currencies: millennium generation, growth of digital trade, simplification of payments, decline in cash, survey of intermediaries, internationalization of trade. In the latter case, a supranational currency based on a basket of existing currencies should help stabilize trade. While the first generation of cryptocurrencies could not escape significant speculative content, the wider adoption and advancement of technology will spawn a new generation of more stable digital currencies that are linked to the economy of goods and services. One is not going to replace the other: stable digital currencies linked to national currencies will not prevent private initiatives. On the other hand, they could increase the instability of private cryptocurrencies by competing with them for the attributes that make them valuable.
Money is at the heart of our economies: The digitization of money should not be left to private initiative. Digital currencies must evolve as an economic tool as part of a larger social project.
(1) Jonathan Gross – Block Chain Developer at SettleMint – Bitcoin Early Adopter
(2) Reference to data mining activities: Exploration & amp; Data extraction
(3) Global Crypto Asset Benchmarking Study – Cambridge University – September 2020.
(4) Central Bank Digital Currency (MDBC)
What are the cryptocurrencies of the future?
Cryptocurrency: 7 virtual currencies will follow in 2021
- Bitcoin: the benchmark cryptocurrency. …
- Ethereum: the most widely used bitcoin and crypto challenger. …
- Binance Coin: The crypto that invites you to join the big leagues. …
- Ripple: much more than a crypto, a passport for decentralized finance.
Which cryptocurrency should you buy today?
|Page? ˅||For whom ?||Cryptocurrencies available|
|Coinbase||Beginner||Bitcoin, Ethereum, Litecoin|
|eToro||Beginner||Bitcoin, Ethereum, +12|
|octopus||Experienced||Bitcoin, Ethereum, +15|
What are the best cryptocurrencies?
What are the best cryptocurrencies of the year?
- Bitcoin – cryptocurrency No. 1. …
- Ethereum – cryptocurrency No. 2. …
- Ripple – Cryptocurrency No. 3. …
- Bitcoin Cash – cryptocurrency No. 4. …
- Litecoin – cryptocurrency No. 5. …
- Cardano – cryptocurrency no.6 …
- NEO – cryptocurrency no.7 …
- 1- Go to the Alvexo online trading platform:
How do I choose my cryptocurrency?
In which cryptocurrencies should be invested?
- The right reflexes for investing in cryptocurrencies.
- Know your investor profile.
- Give Bitcoin and Ethereum their place.
- Take a keen interest in the asset’s value proposition.
- Understand the underlying technology.
What are virtual currencies?
Virtual currencies are characterized by the fact that they have no physical support (no banknotes or coins), that their value is not tied to gold or any other traditional currency, and that they are not regulated by a central bank or financial institution.
How does the virtual currency work?
The use of a virtual currency presupposes the existence of an electronic wallet and of currencies that enable their circulation and storage. The purpose of virtual currency is the same as that of real money: anyone can buy goods online or in a physical store.
How does the value of a cryptocurrency increase?
The number of people using the currency that trust leads to more or fewer people using the currency, which of course also adds to the value of the asset. What defines the value of a cryptocurrency is therefore also its popularity.
How do you use cryptocurrency?
First track, always in an investment logic: you can exchange your cryptocurrency for another dematerialized currency. Transactions take place on specialized marketplaces, types of mini-exchanges for currencies such as Bitcoin, Litecoin, and other ethers.
What is the future of bitcoin?
JP Morgan believes the price of Bitcoin could hit $ 146,000 in the long run. In a notice released on Jan. 4, 2020, financial holding JP Morgan estimates that the price of Bitcoin could hit $ 146,000 in the long term. …
How do I buy bitcoins?
The fastest and easiest way to buy bitcoin is to use an exchange platform that allows you to buy bitcoin for euros or even other cryptocurrencies if you already have one.
What will the currency of the future be?
Bitcoin is a new payment system, a new monetary currency such as the euro, the dollar or gold. This new form of money is virtual and can be compared to cash on the Internet.
What is the worth of bitcoin now?
(€ 27,110.93) Bitcoin price – BTC value Euro | BTC Direct.
Which cryptocurrency should be invested in 2020?
What are the 3 most promising cryptocurrencies? In our opinion, the most promising cryptocurrencies for 2020 and the coming years are the Tezos (XTZ), the Stellar Lumens (XLM) and the ChainLink (LINK), the prices of which have risen sharply in recent months.
Which crypto should be invested in 2021?
|Surname, surname||Market capitalization||Number in circulation|
|Ripple (XRP)||more than $ 9 billion||43.8 M.|
|Bitcoin Cash (BCH)||+ $ 4.8 billion||18.3 M.|
|Tether (USDT)||+ $ 4.6 billion||4.6 billion|
|Bitcoin SV (BSV)||+ $ 3.5 billion||18.3 M.|
How to invest in Bitcoin in 2020
How do I invest in Bitcoin in 5 steps?
- Register with Bitcoin Trader using this link.
- Create an account on the broker platform.
- Fund your account.
- Select Bitcoin and click « Buy ».
- Open a Bitcoin trading position.