Freedom to Invest

5 Reasons Why Cryptocurrencies Are Booming

One thing’s for sure: Bitcoin is roaring back – and so are a number of other cryptocurrencies. This article delves deeper as to why.

#1 Migration Of Capital Toward Cryptocurrencies

In many countries like China, insecurities in both politics and the economy are fueling the Bitcoin currency’s price. For the wealthy in China, the country’s currency and China’s Communist Party-run central bank remain distrusted even less than more established currencies like the US dollar and the euro, each of which is governed by a more autonomous central bank.

Well-to-do people, particularly in China, are thus trying to hedge their investments and convert at least a portion of their wealth into cryptocurrencies like Bitcoin. Since mid-2016, a direct correlation between the exchange rate of the Chinese currency yuan and Bitcoin can be observed. If the Yuan appreciates in value, the Bitcoin typically depreciates – and vis-à-vis.

#2 Zero-interest era

Globally, investors are looking for investment potential in this era of zero or low interest rate policies implemented by major central banks like the European Central Bank or the U.S. Federal Reserve. This makes cryptocurrencies an attractive object of investment – most notably in view of their performance over the past few months. Aside from Bitcoin, the value of other currencies such as Ripple, Litecoin and Ether has also soared.

More well-established investors and hedge fund billionaires like Michael Novogratz have started to add ten percent Bitcoin and Ether to their investment portfolio. The combined market capitalization of all cryptocurrencies has soared by 50 percent in the space of a few weeks to a peak of more than 60 billion dollars. Of this, Bitcoin alone accounted for approximately one half.

#3 The Gold and Silver Are No Longer Sole Crisis Currencies

End-of-the-world forecasters traditionally gravitate towards gold and silver – currencies of crisis whose valuations invariably soar when economic turbulence is looming. Investors who fear a downturn in the economy now have found options in Bitcoin and the other cryptocurrencies. 

However, like gold and silver, the quantity of digital currency units in circulation is limited – in contrast to traditional currencies, whose growth is under the control of central banks.

With gold and silver, volume is constrained because the precious metals are scarce and the resources are mined – with Bitcoin and most other cryptocurrencies, mathematical algorithms impose limitations on the volume of money that can be mined. 

The storage of gold and silver is a costly proposition and has drawbacks: Ensuring the safekeeping of precious metals comes at a price. While certificates on precious metals can be acquired – it is questionable how much value they have in a genuine crisis. This is where the advantages of purely digital currencies that have no physical equivalent arise.

#4 Long-term Value Appreciation Increasingly Draws The Eyes Of Investors

The volatility of Bitcoin, and certainly of many other cryptocurrencies, has long been a hallmark of their history. However, there are clear signs that the long-term trends are in the direction of value stabilization. Most recently, Bitcoin has gained significantly in value – yet the rally now stretches over a very long period of time. Clearly, Bitcoin still continues to be more volatile compared to gold or established currencies like the US dollar and the euro, but a prolonged rally attracts more attention from investors.

#5 Increased Knowledge of Blockchain and Ethereum is Spreading

A burgeoning chunk of the population is not just catching on to blockchain technologies and Ethereum, they’ re also understanding what’s behind them. Various investors are focusing on the topic, in addition to a large number of developers who are pushing Blockchain and Ethereum technologies forwards.

How Blockchain Could Change the Internet Forever

Blockchain will transform our internet! Or is it? In this article, you will learn what’s behind Bitcoins – and why the Blockchain has the potential to be a game changer for the Internet (or for our lives).

Pretend you could easily connect from hotspot to hotspot and pay only for those few seconds whilst travelling across the city on the streetcar. Putting the security element aside, blockchain has the capability of making such a scenario a reality. Forget about monthly subscriptions, no termination periods, no disconnections, no dependency on telcos or any other provider.

Peer-to-peer is not in its zenith at the moment. Associations such as takedown notices, bootlegging and piracy lie heavy in our minds. Yet one cryptocurrency could be the impetus for a new age of computing, namely Bitcoin. Specifically, the database behind Bitcoins: which is known as the blockchain.

Explaining the Blockchain in 3 minutes

The Blockchain is the underlying technology of the cryptocurrency Bitcoin. Quite simply put, the blockchain is a gargantuan, encrypted text file where all transactions are stored. In the process, the single transactions are recorded in “blocks”, which must be generated beforehand, i.e. “mined”. This process of “mining” then produces a new block, each of which will be attached onto the preceding one. Together, all the blocks constitute the blockchain. A colossal stack of Post-Its, in a sense.

As a result of these interconnected blocks, that contain the transactions of, say, two parties, no third-party such as a bank is necessary – hence the biggest benefit and at the same time why the transactions are so rapid and cost-efficient. From a technical point of view, the blockchain is a log file in which all peer-to-peer connections are stored, beginning with the Genesis block.

This means that the database itself, i.e. the blockchain, is spread out. Several database systems exist, naturally, enabling the data to be disseminated throughout multiple nodes. That being said, one of the beauty of blockchain is that anybody can possess a node that doesn’t necessarily have to be trusted by the other nodes in order to guarantee consistent data. In lieu of trust, a proof of work is demanded within the Blockchain, which is pretty resource hungry to accomplish. The reason for this is the fact that the participating nodes fundamentally and mutually lack trust in each other, thereby making it more complex to manipulate the blockchain.

The Blockchain: Peer-to-Peer Revolution

Having a distributed, decentralized system that can nevertheless demonstrate a clear and traceable human-data relationship enables more freedom. Greater freedom? Absolutely. This is what happened when Wikileaks was under pressure, and supporters found that donating money was virtually impossible because Paypal had frozen their accounts.

Blockchain as a peer-to-peer technology renders such things absolutely impossible, because Paypal is simply not needed anymore for such a money transfer. Hence, there is nobody that can force a service provider like Paypal or other financial service provider to halt the transfer of funds. Using the blockchain facilitates a direct transfer from the donor to the beneficiary.

Yet the Blockchain is capable of more than that, in fact, some smart minds are even clamoring to “Rewrite Everything!” because: Bitcoins are simply the tip of a mammoth technological iceberg.

The Limited Utilization of the Blockchain

Indeed, the very concept underlying bitcoins is transforming how we deal with by-the-book data – yet the blockchain is not well suited for every imaginable scenario, as it does not scale well without radically modifying the fundamental principles of the bitcoin protocol. Moreover, the blockchain suffers from a lack of performance for the simple reason that even a dictatorship can act faster than a democracy: within the blockchain, no authority exists.

Indeed, the blockchain was built to make Bitcoins possible. As such, Bitcoins are not a result of the Blockchain, but rather the reason for it. Which is what we should keep in mind: The Blockchain, plainly speaking, is a stack of Post-Its, and not a high-end architecture or framework. There is precisely one specific use case: bitcoins.

Blockchain Applications: Authoritarian Oligarchy?

No authority exists within the blockchain, nor is there a third party that makes decisions. There is no bank to handle a transfer, nobody to determine the authenticity of data. All data is transferred peer-to-peer, i.e. from one user to another.

This benefit turns into a problem, that is, when blockchains are used in a different environment, i.e., in a different way than an accounting database. After all, the blockchain is the basis for Bitcoins. Plus, in the Bitcoin universe, users are rewarded with Bitcoins for helping to keep the system up and running. This is done by generating blocks with which interaction can take place in the future. Herein lies the problem.

Blockchain systems being created today are necessarily “pre-mined.” In other words, someone has to create blocks in order for the system (for example, a WebApp or SaaS) to be used at all. Otherwise, if they don’t exist, the system won’t work either. Consequently, the blockchain in practice degenerates into an oligarchic system wherein only a few individuals possess a disproportionate amount of “coins”. It is precisely because the complexity of providing proof-of-work exponentially increases as the system is used that early entrants find it many times easier to generate blocks than those who enter the system at a later stage. Hence, early users become oligarchs who must be trusted not to exploit the system. Thus, transforming them into an artificial authority. This is exactly the problem that breaks with the main argument in favor of blockchain, and that is not having to trust any authority!

Blockchain: An Innovation Leader?

Finally, do you think it’s time to herald the blockchain as the new database paradigm? Absolutely not. Possibly, however, in certain use cases. Blockchain is a cornerstone technology, much more: it is a platform for innovation, whose value will only become established in the future.

Similar to TCP/IP in the past. Its protocol made the Internet possible in the first place, of course, so just as it was unforeseeable in the 1990s exactly how the web would evolve to date, it is now unforeseeable what the blockchain will be capable of enabling in the future. Nowadays, smart contracts that take care of their own compliance are just the beginning of something really big.

Can you imagine a world in which data can be exchanged – without a third party?

What Is Cryptocurrency?

Bitcoin is not the first crypto-currency to appear, but pre-Bitcoin experiments all ended in failure. These include DigiCash, CyperCash and E-Gold.

Cryptocurrency was made popular thanks to Bitcoin and its creator: Satoshi Nakamoto. Nowadays there are several thousands of them, but be careful 99% have no real use and will be quickly forgotten. They also have various other names such as virtual currencies, crypto-active, electronic currencies or digital currencies. Ethereum with its ETH symbol is the second best-known crypto. Each cryptocurrency has its own symbol (ticker in English), Bitcoin’s symbol is BTC.

What Is A Cryptocurrency?

Assets that are exchanged peer-to-peer (P2P) without a trusted third party such as banks. They do not have a physical form such as coins or banknotes, they are not regulated by a central body and have not been indexed to the dollar or gold for instance.

Electronic currencies use blockchain technology to pass the ownership of the cryptos between their different holders. Therefore, these cryptocurrencies are simply a sequence of numbers whose ownership is handed over from one person to another. Thanks to cryptos and blockchain, you can now also transfer value over the Internet!

The French government says that crypto currencies do not qualify as currencies since they are too volatile, do not need to be accepted by merchants and are not regarded as a store of value. One thing is certain, this might very well change in the near future.

Cryptocurrencies have experienced an incredible boom in 2017 and 2018 with an incredible demand for fundraising or ICO. Fundraising in crypto enables anyone, from anywhere in the globe, at any time, to invest in a project.

Presently, the trends of fundraising in crypto-currency has clearly diminished, however the market capitalization of the latter, and especially of the BTC, continues to increase. Over $460 billion for Bitcoin on December 26, 2020.

More and more interest is being shown by the financial institutions through numerous investments from specialized hedge funds and companies.

Development and Evolution

A number of developers, known or anonymous, are responsible for the realization and evolution of these digital assets. These developers choose the properties of these assets: the number of circulating tokens or coins, the transaction speed, the reliability (security) of the network… In some special cases, it is sometimes possible to modify the rules. Regardless of whether they are minimal or significant, these modifications lead to the establishment of a new crypto. This is how Bitcoin split and gave birth to Bitcoin Cash on August 1st, 2017.

The new crypto assets are generated by a mining process, with people agreeing to lend computing power to safeguard the crypto cash and are compensated with a monetary reward. More information about which crypto-currency to mine can be found on the internet and through blogs like ours.

In a nutshell

For the most part, the main objective of most of these new crypto-currencies is to fix the issues of the predecessors. For instance, Litecoin is specifically designed to make money transactions faster than with Bitcoin. Ethereum, which focuses on the development of intelligent contracts, or decentralized applications… Or a whole bunch of crypto-currencies aiming to increase the volume of transactions per second on the blockchain. Some other crypto like Ripple, Monero or, the French one, Tezos can be mentioned.

Most cryptomoney systems use blockchain technologies even if other technologies can be used.

Should you be acquiring crypto-currencies, whether for investment or trading, we recommend that you research them thoroughly beforehand.