SCCC Swiss Canadian Chamber of Commerce (Ontario)
 

SUISSE news Spring 2019 / March 2019

What is Cryptocurrency?
Gremis Communication Agency

Most of us have heard about cryptocurrencies like Bitcoin before in the news or from friends, but very few people understand what a cryptocurrency actually is. By the end of this short article, however, you’ll know more about cryptocurrencies than most people in the world!

In simple terms, a cryptocurrency is a digital currency that uses cryptography for security. Cryptocurrencies are usually based on blockchain technology, which makes them decentralized, highly secure, and almost impossible to counterfeit. As most cryptocurrencies are not issued by one central authority, they are theoretically immune to any kind of interference or manipulation.

Over 4,000 cryptocurrencies have been created over the past 10 years, with more than 2,000 different kinds of cryptocurrencies in existence today.

A Brief History

Nobody actually knows the true identity of the person that invented the first cryptocurrency. “Satoshi Nakamoto” created Bitcoin — the first and still most important cryptocurrency — in late 2008.

It wasn’t until 2011 that other cryptocurrencies began to emerge, known as “altcoins.” These new cryptocurrencies arose in an effort to improve upon the original Bitcoin design. For example, Litecoin was created to offer faster transaction times in comparison to Bitcoin. In 2015, an altcoin called Ethereum went live and gained massive popularity, attracting much interest by enterprises around the globe.

2017 was the year that cryptocurrencies really took off and became mainstream. Bitcoin’s price surged from $900 per BTC to nearly $20,000 per BTC by the end of the year, attracting a lot of hype and publicity.   

Then in 2018, we saw the cryptocurrency market crash and lose 85% of its value over the year. Yet, even with the plummeting value, research shows cryptocurrencies have still been gaining popularity. In 2017, there were roughly 18 million people participating in the cryptocurrency ecosystem, while during 2018, that number jumped to 35 million users — that’s a 94% increase in one year alone.
Uses of Cryptocurrency

As time goes on, more and more use cases of cryptocurrency continue to emerge.

The most obvious use of cryptocurrency is, of course, for transaction purposes — it is a currency, after all.

Cryptocurrencies allow payments to be sent lightning fast and with little to no transaction fees, which is especially useful for cross-border transactions. Transferring money from one bank account to a foreign bank account can take days, plus the banks eat up huge percentages in fees. With cryptocurrencies, these issues no longer exist.

But there’s a whole lot more uses for cryptocurrency than just making transactions. When a cryptocurrency is tied to a real-world asset, such as gold or real estate, the public can easily invest in assets that were previously too cost-prohibitive to most. This allows the crowdsourcing of large investments like a commercial real estate property, where each person that buys some crypto then owns a fraction of the asset and can benefit from the increase in value over time.

Pretty much every industry is currently being affected by cryptocurrency and blockchain technology, from healthcare to banking. And we will continue to see more use cases continue to arise as the technology matures. 

Pros and Cons of Crypto

There are many benefits to cryptocurrency, but also downsides as well.   

Benefits include:
  • Fast and low-cost transactions between two parties, without the need for an intermediary
  • Secure from manipulation and fraud
  • Decentralized, allowing full control over your assets
  • Transparent and trustless
  • Potential for investment opportunities
Downsides include:
  • High volatility
  • Cryptocurrency mining (the creation of new coins) can require massive amounts of energy
  • If something goes wrong in a transaction, your money could be lost as no central authority is there to step in to help
  • Crypto being stored on online exchanges are vulnerable to hacks, so it is important to know how to securely store your crypto

Conclusion 

Even though the cryptocurrency market has plummeted from its all time high back in 2017, adoption continues to be on the rise. It’s looking like cryptocurrencies and the blockchain technology they are built upon are here to stay. In 2018, 84% of businesses worldwide said they are actively involved in utilizing blockchain and cryptocurrency solutions for their business. It’s likely we will continue to see more enterprises continue to adopt this new technology as it continues to mature and gain more credibility.