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Cryptocurrency-Where Are We Headed?

Cryptocurrency-Where Are We Headed?
Photo by Olya Kobruseva from Pexels

In recent years, cryptocurrency has become one of the most popular developments in financial infrastructure. With the constant evolution of technology, more and more people and businesses are drawn to investing in cryptocurrency in hopes of excellent returns shortly.

What is cryptocurrency?

Digital currency can be used to purchase goods and services from companies is known as cryptocurrency. In layman’s terms, cryptocurrency can be compared to tokens or casino chips. The user pays cash to buy the cryptocurrency and later uses such cryptocurrency to purchase goods and services. This entire system works on blockchain technology. Blockchain is decentralized in nature and can therefore be accessed over multiple systems. Currently, there are more than 6700 types of cryptocurrencies available, and the number keeps increasing every day with the evolution of technology. 

Why did cryptocurrency rise to fame?

Here are some of the main reasons why cryptocurrency shot to fame in recent years:

1. The supporters of this technology believe that cryptocurrency is the currency of the future and that the prices for the same will increase exponentially shortly. Investing in cryptocurrency now itself seems to be a lucrative option for individuals and institutions.

2. Cryptocurrency removes the role of central banks in the management of money. This proves to be beneficial as the value of money is not reduced due to inflation. Cryptocurrencies are managed via personal digital wallets, which have many beneficial features, such as being able to use prepaid cards and keeping your data as private as possible.

3. Blockchain technology, which is the foundation of cryptocurrency, has a decentralized processing system that makes it easy to use and is safer than most traditional payment systems. 

What does the future hold for cryptocurrency?

There is no doubt that if appropriately regulated, cryptocurrency can emerge as one of the most payment systems of the future. It is cost-effective as well as time-effective. The current financial infrastructure is in shambles, and now it is only a matter of when this traditional system shall collapse. The interest in cryptocurrency first peaked during the financial crisis of 2008 and has only become more and more popular with time. The recent COVID-19 pandemic served another blow to the economic infrastructure in the world, and with changing times, we need to adapt to newer, more accessible, and more beneficial technology such as cryptocurrency.

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Businesses and individuals are constantly learning to adapt to the changing scenario. To stay ahead of the competition, many fintech firms have already started launching their cryptocurrency systems. Individuals have started investing in cryptocurrency as they believe that traditional payment systems will be replaced by cryptocurrency with time.

Up until now, the discussion on cryptocurrencies has majorly revolved around Bitcoin. The upward price volatility of bitcoin and the system’s safety has attracted a lot of new-age investors. However, it is believed that stablecoins will be the method for mainstream adoption of cryptocurrency in the future. Cryptocurrencies that are tethered, backed, and supported by any underlying asset are known as stablecoins. Although bitcoins continue to rise in popularity, with newer businesses adding the same to their balance sheets, the future of cryptocurrency lies in stablecoins.

For better or worse, capital gains tax rules apply to cryptocurrencies like Bitcoin and Ethereum. The Internal Revenue Service (IRS) treats all cryptocurrencies as capital assets and taxes them when they’re sold at a profit. This tax guide for crypto 2021 will be helpful in getting more ideas and information in your journey to cryptocurrency.

Here are a few reasons why stablecoins are the future of cryptocurrency:

1. Individuals and institutions are attracted by the lower price volatility of stablecoins. Stablecoins look like a safer option to invest as compared to bitcoins and other popular forms of cryptocurrency.

2. Stablecoins are better positioned to push mainstream adoption of cryptocurrency and blockchain technology in general.

3. Stablecoins have provided the space for the evolution of new-age technologies such as non-fungible tokens (NFTs) and decentralized finance (DeFi) systems. In contrast to stablecoins, bitcoins have failed to encourage the development and evolution of newer technology.

4. The initial objective of bitcoins to create a distributed and decentralized payment system has not been met yet. On the other hand, stablecoins look like the future of the implementation of cryptocurrencies.

While the future of cryptocurrency looks promising, there is an urgent need to develop a legal framework to protect individuals and institutions. Without a proper legal framework, cryptocurrency tends to lose its authority as a formal payment system. Cryptocurrency is the future of our financial infrastructure. For more information on cryptocurrency and its future, visit platforms like this software.

Featured Photo by Olya Kobruseva from Pexels

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