More than a decade ago, an anonymous person, only known by the name Satoshi Nakamoto introduced the first cryptocurrency, by the name of Bitcoin, to the world.
Today there are hundreds of these cryptocurrencies to choose from, and although people keep warning that it will crash, it has stood strong over time. Cryptos are already poised and have the potential to disrupt, if not replace, the traditional financial markets. But what happened that they can do this?
The beginning
Although the concept of online currency is not a new one and predates Bitcoin, it was in 2009 when a person (or group) known only as Satoshi Nakamoto, publicly released Bitcoin, a peer-to-peer electronic cash system. It was created to protect against inflation and to be more secure than traditional sources. It put the control of the money back in the hands of the people.
This set off a chain of events, including bitcoin mining and the introduction of a slew of other alternative currencies, some of them being successful and some falling flat. All of the new cryptocurrencies are being developed to address the shortcomings of Bitcoin or to cover a different market.
The first value assigned to Bitcoin was believed to be around $0.00001 per token when one of the early adopters of the currency swapped 10,000 units for two pizzas. From there, it has gone up and down in value with the highest recorded value at $19,783.06 on 17 December 2017. 1 Bitcoin at the moment runs about $7000 but fluctuates all the time.
The emergence of alternative cryptocurrencies
As the popularity of bitcoin grew, and the value with it, people started to see some of the limitations. Because of this, other cryptocurrencies were created to bridge this gap in the limitations of bitcoin.
Flaws of Bitcoin included things like privacy, transaction speed, proof of stake and others. Forks like Bitcoin Classic and Bitcoin Cash came into being by manipulating the existing code to reduce confirmation times, reduce transaction costs and correct scalability issues.
Other altcoins that have sprung into being are the likes of Namecoin, Litecoin, and swift coin, which all started in 2011. The most popular of these altcoins are Ethereum, Ripple, Zcash, Litecoin, Monero, and Dash. There are currently more than 1,500 cryptocurrencies online.
Growing acceptance and surge into mainstream
Cryptocurrencies are becoming very popular. So much so that there are countries, for example, China and Singapore, that are planning to launch their cryptocurrencies. Furthermore, bitcoin and other cryptocurrencies are being accepted by many retailers and there are even bitcoin ATM locations where you can withdraw your bitcoin in local currencies.
Most of the popular digital currencies appear to be gaining ground, seeing as the list of retailers and services that now accept cryptocurrencies as payment is growing quickly. The market value of cryptocurrency surpassed $1 trillion in 2018 as the wider market is starting to accept it as a valid method of payment.
Challenges to mass adoption
Digital currency does meet the requirements to be a medium of exchange, store of value and unit of account. These characteristics make in real and reliable monetary value by any measure. But unfortunately, there are still some hurdles that need to be overcome before everyone will accept these digital currencies.
A big hurdle that it needs to overcome is the volatility of the market. Many merchants are reluctant to accept it as payment because of the value that fluctuates so easily and frequently. Other challenges that plague it are scalability, security, and of course, the issue of who regulates it. These issues will need to be addressed before it can become a market standard.
