Published in El Pais, 27 November 2018.
At this time of writing there are very few who have not heard of the digital currency known as Bitcoin. The first of its kind, the coin made headlines last year as it closed in on the $20,000 mark, remarkable since it was worth only $1,000 a few months prior and less than a cent back when it was created in 2009. Many people (myself included) wish they had a time machine at this moment. Of course, that time seems like an eternity ago as the coin has since fallen from grace being worth roughly $4,500. Many people who bought into the craze in December have since lost a lot of money and the news only gets worse as there is little sign of a recovery. I will not try and speculate why Bitcoin dropped drastically or why it was even that high in the first place. What I do hope to achieve is explain what exactly its appeal is as well as other cryptocurrencies.
The idea behind Bitcoin is simple, if a country, or the world, were to move to where we get paid and spend money with Bitcoin, then the economy would be completely decentralized, and we would no longer need financial institutions like banks. Of course, the main purpose right now seems to be investing or to shop in the underground market where your money would be harder to trace.
As time went on hundreds more crypto currencies entered the market with each one having their own advantages and disadvantages. Ripple is currently the number two currencies and aims to make international payments quicker and cheaper with their latest test sending $30 million around the world in seconds at a cost of $30. Ethereum developed smart contracts where the coin would only be paid once certain conditions were met, reducing chances of fraud. Others can be used as secure storage or supply chain management.
No two cryptocurrencies are alike but they all have one thing in common, they are all in it’s infancy. While many of these coins have been tested for the most part the benefits listed above are hypothetical and things are so volatile that bad news for one currency can have a negative impact for everyone involved. Will cryptocurrency start to see mass adaptation? I believe so and the law of supply and demand should dictate that the most successful should see an increase in value, meaning there is money to be made should you decide to invest in the right ones, but head my warning that it is a very risky game and you should not invest any amount you are not prepared to lose.
Disclosure: I own various cryptocurrencies including Ripple which is mentioned in the article.