The Effects of Crypto CurrencyResearch Statement This report will examine the howcrypto currency has proven to be revolutionary and its effects on the economy,banking & finance on a global scale.Purpose The purpose of this report is toenumerate the success of different types of crypto currency in different financialmarkets, and how it is effecting different countries and there markets on aglobal scale.
Also to show while it may be revolutinary it has cons just likeit has pros.Background and Significance A crypto currency is mainly adigital asset designed to work as a middleman of exchange that usescryptography to secure its transaction, to control the creation of more units,and to very the trades and transfers (Dictionary, Crypto Currency, n.d.). Cryptographyis mainly the method of storing and transmitting data in a particular form sothat only those who it was intended for can read and process it much likesecret code of some sort (Dictionary,Cryptography, n.d.).
The first crytocurrency was introduced by an americancryptographer David Chaum in 1983 known as electronic money called ecash. Laterin 1995, he implemented it through Digicash, which untraceable by banks, thegovernment, and third parties because it required a software in order towithdraw notes and it designated specific encrypted keys before it could besent to a recipent (Magazine, 1999).Traditionally there are two types of crypto currencys such ascentralized and decentralized. By, definition, centralization is “the concentraion of control of an activity or organizationunder a single authority” (Blockchain.
wtf, 2018). Forexample, ripple is a centralized crypto currency controlled banks. According toRipple financial institutions, network operators and regulators play criticalroles scaling and providing stability to payment systems (Ripple, n.d.). Which in context since “financial instituations” and “regulators are part ofthis equation and the totality of human involvement describes it ascentralized.
By, definition, decentralization is “the movement of departments of a large organization away froma single administrative center to other locations” (Blockchain.wtf,2018). This is where one of the top crypto currencies comes into play “Bitcoin”.
Which was the firstdecentralized digital currency created by Satoshi Nakamoto. It works without acentral bank or a single administrator or any regulators of that sort likeripple (CoinDesk, 2015). It was thefirst time the world had seen peer-to-peer transactions over a network takeplace between users directly without an intermediary.In the 2005 when people would say “major financial revolution” some would think about the skyscrapors in New York and allthose banks. But nowadays people are referring to crypto currency. This geniusinvention has taken the world by surprise with the benefits and how much moneythey can really save everyone of that nature and even those big banks. Whowould have thought that there would be a world soon to come where banks wouldn’t be the middlemen of transactions and the government wouldn’t check or regulate your money before you sent it overseas.
If this still doesn’t prove this isrevolutionary then looking at the market capital of cryptocurrencies which was$185,182,008,333 while I am writing this.The world is slowly starting to see the uprising ofcryptocurrencies and how they will impact them in the future. Crypto currenciesare not just getting speculated by investors but entire countries and thereeconomies. To date, countries that have issues their own cryptocurrenciesinclude Ecuador, China, Senegal, Singapore, Tunisia, though these contries willnot be standing alone for long with Estonia, Japan, Palestine, Russia, andSweden looking to launch their own national cryptocurriencies. These countriesare trying to take a step further and replace paper tender altogether withChina being one nation that will try to pursue that step.
Even though the central banks are critisizing thecryptocurrency boom and how it is likely to fail. Though we all remember theseare the same banks that could not predict there own downfall in 2008. The underlyingtechnology is so advanced that even these big banks will hold and buy cryptocurrencies or even create there own centralized. For example, South korea hadinitially backtracked there decisions to stop servicing cryptocurrency accountsas crypto investers protested and the government rediscussed its policy (Helms, 2018).
This paper will examine in detail the effects of cryptocurrency and how it has proven to be revolutionary. It will also discuss how itis effecting the financial markets all around the globe. While talking aboutits pros and cons and if this revolutionary currency will have a positive ornegative impact on a global scale.