The advent of the blockchain technology has already made waves in the financial community, most notably from the buzz surrounding bitcoin. As of October 20, the price of Bitcoin is above $5,600 on many exchanges. Up over 800% year over year. While there is no question that investing in Bitcoin one year ago would have been profitable, is it still a good investment decision today? While many bullish investors claim the price of Bitcoin could exceed $10,000 in the next six months and over $25,000 in the next few years, it is important to understand the risks that are associated.
In order to understand this, it is important to look at the global picture. Not more than a few weeks ago, Sergei Shetsov, of the Russian Central Bank, had stated that websites of exchanges that are selling digital currency will now be blocked. This has come after a similar response from the Chinese government in which many of the Chinese cryptocurrency exchanges were shut down, and new initial coin offerings halted. This is in response to the large amount of corruption, tax evasion, and money laundering that has generated through the advent of digital currency. There is, however, a clear technological innovation that has occurred with the creation of the blockchain, and thus it has caused governments to explore the idea of creating a national currency. Japan, meanwhile, has decided to embrace digital currency declaring Bitcoin as a legal tender option.
Perhaps part of the problem is that individuals view Bitcoin less as a currency and more as an investment option. This may in part be because there are limited options to use digital currency as payment (especially in the United States) and for the average purchaser, it is not very easy to use and sell. There are also concerns around the security of digital currency. This has led to the creation of a variety of alternate coins. Some of these include Litecoin, Ethereum, and OneCoin. Since Bitcoin is one of the first currencies, it has had some very real and clear problems. OneCoin has sought to address some of these including utilizing policies such as KYC (know your customer) to help prevent a variety of fraudulent activity, and offering a greater number of coins for circulation. This will result in greater sustainability as mining of Bitcoin will become exponentially harder as it approaches the circulation ceiling of 21 million.
The future of alternate coins is bright, in part because there is plenty of room for innovation in this space. Bitcoin may be the current market leader, but there could be a larger room for other digital currencies to grow. The threat that digital currency has to national banks may result in numerous roadblocks to the crypto community, but the blockchain technology is simply too great to be ignored.