Technology is consistently growing. There’s no use lying about it. Those of us who rush out to get the latest version of the I-phone usually wind up disappointed when a few months later a “superior” edition spontaneously appears on the market.
Now, with the ongoing trends of machine-learning, artificial intelligence and the removal of human decisions, our dependency on computers makes one think that a film like “The Terminator” isn’t too far off.
In the midst of these advancements, more citizens are turning to the virtual world to solidify their finances. This doesn’t refer to programs such as PayPal, for instance, where customers can receive payments in an online account that are later transferred to their banks. When it comes down to it, any funds in a PayPal account can be labeled as “everyday cash.”
I refer instead to “digital currency,” a fairly new and developing financial strain that continues to garner more trust.
What is Digital Currency?
Digital currency is money that exists only as binary code. Its origins technically date back to the year 1981, with the publication of the paper Untraceable Electronic Mail, Return Addresses and Digital Pseudonyms by inventor David Chaum, in which the basic foundations and rules pertaining to digital currency are inherently laid out.
The following year, Chaum would build the International Association for Cryptologic Research (IACR) and publish his second paper Blind Signatures for Untraceable Payments, which would more or less complete the technical model required for digital currencies.
Progression would continue into the 90s via the creation of organizations such as DigiCash and the establishment of e-gold, a gold-backed digital currency founded by entrepreneur Doug Jackson.
Then there was Bitcoin
However, things would not take a major step forward again until 2009, when the Bitcoin block-chain would appear publicly on the Internet. Bitcoin is a peer-to-peer digital currency that is also a free, open-source payment software system.
It is often considered the most widely used form of digital currency in the banking and financial worlds today, with Bitcoin production rates standing at over six batches per hour until its inevitable halving in July of last year.
Bitcoin ATMs have appeared all over the United States in recent years from Texas to New York, as well as in international locations such as Sydney, Australia and Helsinki, Finland. The currency is accepted at a number of convenience stores and retailers all across the globe, and is continually earning the attention of mainstream financial institutions and investors.
Yet despite its growing popularity, digital currency is not without its detractors. Common criticisms include the involvement of risk, with many questioning the safety of digital currencies due to their extreme volatility.
At the time of this writing, each bitcoin is estimated to be over $1200 each. At first, this sounds exciting and fun – trading coins for over a grand each? What’s not to love? Well, don’t get too comfortable yet. Things can fall at any moment from such a height, and they have before such as in late 2013, when bitcoin, hovering at around the same price, plummeted by nearly half overnight due to unforeseen market manipulation.
The coin continued to go through a rocky period for nearly two years after, dropping down to $500, then $400, and reaching its lowest point (below $200) in January of 2015. The coin stood its ground between $215 and $230 for most of the year until it experienced an unexpected jump in price after nearly 11 months of unwavering “downtime.”
It doesn’t come without risk
Additionally, many digital currencies are centralized, and as a result may be seized by the government at any time without warning. Lastly, highly anonymous currencies are often thought to attract criminal activity, with the violent fall of Mt. Gox in 2014 considered the staple and most well-known example.
Still, however, one cannot be deterred from what is clearly a growing trend by some darkened pathways. No startup began with a perfect system, and over time, the efforts and strengths of those who would see digital currency become a solidified practice will overpower the loopholes one presently witnesses.
As technology expands, it is not difficult to accept the possibility that digital currency will soon become global currency.