Cybercurrency or cryptocurrency is a type of digital currency or virtual currency that use decentralized control as opposed to centralized electronic money and central banking systems. Cybercurencies allow for borderless transfer of ownership and also facilitate instantaneous purchase of products and services. Digital currencies have a limited number of users and the regulations on taxes are still evolving. Cybercurrencies also allow for payments to be made directly between the payer and recipient and this eliminates intermediaries such as banks that mean longer processing periods and costs. Cybercurrencies make payments flow simply and transparently.
Types of Cybercurrencies
The Bitcoin has been in existence since 2009 and has a current market capitalization of over $10 billion. Its trading volume is higher than that of all other cryptocurrencies combined. It’s market domination has been widely accepted and the other coins are now considered “alt coins”. The creator of Bitcoin remains anonymous.
This cybercurrency was created by Vitalik Buterin in 2015 with the aim of creating a coin that improved on the flaws of Bitcoin. In just 3 years, it has been able to garner a market capitalization of just over $1 billion and is a leading platform in Peer-2-Peer (P2P) contracting methods thad do not require a third party for verification. It is now considered Bitcoin’s biggest rival.
Created by Charles Lee in 2011, this coin has striking similarities to Bitcoin and is competing with it as well. Its market capitalization is, however, quite low at only $180 million.
Monero uses a unique technology dubbed the “ring signature” and it is considered 100% anonymous. To them, their cybercurrency is private, secure and untraceable.
Other cybercurrencies include Eutherium, MaidSafe, Ripple, Dash and Lisk among others.
The efficiency and usefulness of cybercurrencies is still under debate but the fact that it is inflation proof makes it important. Re-valuing takes place numerous times a day and this eliminates the risk of inflation. Another advantage of cybercurrency is that it does not depend on the stability of any country or group of nations and this assures investors that it is not likely to collapse. If the consfidence of the users is high then these currencies will stand the test of time. Another reward presented by cybercurrencies is its simplicity that has facilitated its rapid growth. To use cybercurrencies, one does not need third parties, a bank or proof of identity and this makes it easier on an online consumer. The anonymity that comes with cybercurrencies is perhaps its greatest advantages. The fact that there is no “paper trail” or a transaction report ensures that individuals that use cybercurrencies remain virtually anonymous.
Despite these positive attributes of cybercurrencies, there are also drawbacks associated with them. First, its anonymity attracts people who want to trade in illegal and black markets. The lack of “paper trail” enables criminals to indulge in their activity without the risk of being caught. Secondly, lost cybercurrencies cannot be traced or recovered. Once you lose it, it is gone. To avoid this, users are encouraged to store it offline at all times. Other disadvantages of cybercurrencies are its poor liquidity, volatility of its price and its low penetration in the market. There are many investors and financial experts that are still skeptical about cybercurrencies.
It is likely that banks are afraid of Bitcoin and blockchain because of the competitive threat that it poses to them. A bank CEO termed Bitcoin a “fraud” while others have described it as volatile and weak store of value. Banks are also at times not transparent and they are afraid that investors may use this loop hole to invest in Bitcoin and throw the banks out of business.