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The Future of Decentralized Currency

Decentralized currency is the means used to buy and sell goods within a decentralized market. Decentralized markets are market structures in which a network of technical devices enable market investors to establish a marketplace that does not have a centralized geographical location. This is done through the internet and technological advances. Investors are provided with access to different ask prices and bids for items. By using decentralized currency, they can trade directly with other investors and businessmen without needing to use an exchange of centralized currencies.

Benefits of Decentralized Currency

Decentralized markets have numerous perceived benefits among investors and those with technological prowess. These are some of the following reasons a person might want to use decentralized currency in their online transactions as opposed to centralized currency:

  • There is no singular resource that hackers can penetrate to receive information
  • A decentralized transaction increases the transparency between involved parties, particularly when technology is employed to make sure all parties agree upon the information and data shared during the transaction
  • Decentralized currency can be used without any regulatory oversight
  • The lack of regulatory oversight allows transactions to be anonymous

Increased Regulation of Decentralized Markets

The future of decentralized currency is a questionable one. With the proliferation of currencies like Bitcoin, and the increased use of cryptocurrency for online transactions, some people are calling for the implementation of enforcement and regulation. For people who rely on the anonymity of cryptocurrency transactions, the potential of new regulation is a drawback. But how could enforcement and regulation be introduced to decentralized currency when decentralized currency, by definition, isn't within the power of any one governing body?

Cryptocurrencies seem wonderful on the surface, but they're hiding some dark truths. More than nine million dollars per day is lost to cryptocurrency scams. There are more than 1,300 cryptocurrencies currently in circulation, and the market cap for cryptocurrency will hit an expected trillion dollars this year. This means that the market rivals the biggest industries in the world today. There haven't yet been any systems of checks and balances introduced, largely due to the decentralized nature of cryptocurrencies.

Because of the lack of regulation, scams abound. Some of these scams have duped customers out of more than $300 million, and they don't seem to be stopping anytime soon. Bitcoin mining in particular uses more electricity per day than the entire country of Ireland can produce in one year.

There are also growing fears that the market might be manipulated by big name players. This manipulation might occur in the form of bots which are used to manipulate prices, or coders who find each other over forums and team up for the creation of these bots.

Another common scam is a social media phenomenon wherein people will impersonate celebrities and promise that they'll give a large amount of Bitcoin to followers who send them a smaller amount of Bitcoin. Several celebrities and proliferate social media presences have had their accounts hacked and messages sent en masse to their followers.

In response to the celebrity Bitcoin fraud, Google, Facebook, and Twitter have all banned the advertising of cryptocurrencies on their websites.

Compromising Freedom

Even with the scams making headlines, the idea of increased regulation has one major drawback: restriction of freedom. Cryptocurrency's lack of regulation represents a libertarian ideal, in which markets are completely free to buy and sell as they please, investors are wholly anonymous, and market values are based on supply and demand rather than governmental regulation.

For many proponents of cryptocurrency, trying to regulate decentralized currencies would take away the very thing that makes decentralized currency unique; it would take away the freedom of the free market that investors have created.

Some countries have made the decision not to impose regulations on cryptocurrencies. There are other countries which have banned the trading and selling of cryptocurrency altogether, India being one of these.

Is the Market Going to Crash?

The future of decentralized currency depends heavily on a few different factors. First, it matters whether governments or the proliferators of cryptocurrency decide to impose new regulations. Next, it matters which cryptocurrencies rise in value over the next few years. Different cryptocurrencies have different market values based on the amount available, the number of people "mining" them, and the number of people using those currencies to buy and sell on the open market.

Finally, it matters how companies respond to the changing demands of the industry. Kraken, Gemini, and Coinbase are all companies which assist in the assignation of value to digital currency. They use infrastructure and interfaces that are both easy to use. These companies bring concrete value to cryptocurrencies - value in the billions of dollars. The industry grew by more than 3400% in 2017.

If these companies can keep a handle on the evolving needs of the cryptocurrency market, and coders can find ways to impose consequences on scammers, then decentralized currency might be here to stay. It has all the hallmarks of a concrete industry: it fills a gap that wasn't previously filled, it generates billions of dollars in usable income, and it allows for anonymous transactions.

But if decentralized currency keeps climbing at the explosive rate it has been, and nothing is done to mitigate or change this, the market could be heading for a full-scale collapse.