Many financial analysts have predicted that there will be big changes in the world of cryptocurrency in the next several years. In the case of Bitcoin, we have already started to see institutional funds enter into the market. Others have speculated that cryptocurrency assets will soon be floated on important benchmarks like the Nasdaq.
Once this occurs, it will add further credibility to digital currencies and blockchain assets and make their use more prevalent in businesses.
As a viable alternative to traditional fiat currencies, a growing number of businesses have already started to accept Bitcoin. However, there are still several steps ahead which will be needed to ensure market legitimacy. According to AskTraders.com, many analysts have predicted that cryptocurrencies will also have a verified exchange-traded fund that can be traded in the market. This would make it much easier for large numbers of people to establish investments in cryptocurrencies and Bitcoin.
Bitcoin: Understanding the Basics
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Cryptocurrencies use innovative peer to peer technology that enables common transaction functions like currency issuance, purchases, and seller processing. Bitcoin falls into this category as a decentralized currency that can be verified collectively on the blockchain network. Interestingly, this type of decentralization can render cryptocurrencies free from most government interference. At the same time, this means there’s not a centralized authority that is able to ensure everything runs smoothly and efficiently. In other words, there is no central bank to back up the value of cryptocurrencies.
Bitcoins are birthed through a digital process that is referred to as “mining” which requires the use of powerful computers capable of solving complicated algorithms in a successful manner. Currently, Bitcoins are created at a certain rate (which is 25 Bitcoins per each 10-minute period). Eventually, this process will reach its height at a point of 21 million. Market analysts expect that this high point will become reality in the year 2140.
Differences Relative to Fiat Currencies
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Of course, these are characteristics that are fundamentally different when compared to traditional fiat currencies. In these cases, the value is backed by government systems as fiat currencies are issued through centralized actions that are supervised by global financial bodies (central banks). This creates both pros and cons for businesses that are thinking about using Bitcoin as an integral part of their corporate transactions.
The Future Outlook of Bitcoin
For bitcoin, the future outlook has been subject to a great deal of debate. The financial media has often initiated headlines touting the positives of the future of Bitcoin and other cryptocurrencies. For businesses, this is important because the total market cap of Bitcoin could potentially explode in the next decade. Some have indicated that this figure could rise as high as $10 trillion.
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Historic volatility has been seen in this asset class, and this is the reason many businesses have avoided the use of cryptocurrencies. This is one of the limitations that businesses can face when using cryptocurrencies in their corporate transactions. In fact, the digital fortune which could be accumulated through Bitcoin investments can also be reduced in a very short period of time. There are also risks associated with certain types of computer hacking or losing access to the virtual vault holding crypto assets.
In time, however, technological advances are likely to remove many of these problems for businesses. As they become more popular, they will probably be subject to more regulation and scrutiny from the government. This could raise the number of merchants accepting cryptocurrencies for their businesses. As cryptocurrencies become accepted throughout the world, they will also gain acceptance with consumers. As a result, the relative complexity of Bitcoin can offer significant benefits to all market participants in the future.