This report will examine the how
crypto currency has proven to be revolutionary and its effects on the economy,
banking & finance on a global scale.
The purpose of this report is to
enumerate the success of different types of crypto currency in different financial
markets, and how it is effecting different countries and there markets on a
global scale. Also to show while it may be revolutinary it has cons just like
it has pros.
Background and Significance
A crypto currency is mainly a
digital asset designed to work as a middleman of exchange that uses
cryptography to secure its transaction, to control the creation of more units,
and to very the trades and transfers (Dictionary, Crypto Currency, n.d.). Cryptography
is mainly the method of storing and transmitting data in a particular form so
that only those who it was intended for can read and process it much like
secret code of some sort (Dictionary,
Cryptography, n.d.). The first crytocurrency was introduced by an american
cryptographer David Chaum in 1983 known as electronic money called ecash. Later
in 1995, he implemented it through Digicash, which untraceable by banks, the
government, and third parties because it required a software in order to
withdraw notes and it designated specific encrypted keys before it could be
sent to a recipent (Magazine, 1999).
Traditionally there are two types of crypto currencys such as
centralized and decentralized. By, definition, centralization is “the concentraion of control of an activity or organization
under a single authority” (Blockchain.wtf, 2018). For
example, ripple is a centralized crypto currency controlled banks. According to
Ripple financial institutions, network operators and regulators play critical
roles scaling and providing stability to payment systems (Ripple, n.d.). Which in context since “financial instituations” and “regulators are part of
this equation and the totality of human involvement describes it as
By, definition, decentralization is “the movement of departments of a large organization away from
a single administrative center to other locations” (Blockchain.wtf,
2018). This is where one of the top crypto currencies comes into play “Bitcoin”. Which was the first
decentralized digital currency created by Satoshi Nakamoto. It works without a
central bank or a single administrator or any regulators of that sort like
ripple (CoinDesk, 2015). It was the
first time the world had seen peer-to-peer transactions over a network take
place between users directly without an intermediary.
In the 2005 when people would say “major financial revolution” some would think about the skyscrapors in New York and all
those banks. But nowadays people are referring to crypto currency. This genius
invention has taken the world by surprise with the benefits and how much money
they can really save everyone of that nature and even those big banks. Who
would have thought that there would be a world soon to come where banks wouldn’t be the middlemen of transactions and the government wouldn’t check or regulate your money before you sent it overseas.
If this still doesn’t prove this is
revolutionary then looking at the market capital of cryptocurrencies which was
$185,182,008,333 while I am writing this.
The world is slowly starting to see the uprising of
cryptocurrencies and how they will impact them in the future. Crypto currencies
are not just getting speculated by investors but entire countries and there
economies. To date, countries that have issues their own cryptocurrencies
include Ecuador, China, Senegal, Singapore, Tunisia, though these contries will
not be standing alone for long with Estonia, Japan, Palestine, Russia, and
Sweden looking to launch their own national cryptocurriencies. These countries
are trying to take a step further and replace paper tender altogether with
China being one nation that will try to pursue that step.
Even though the central banks are critisizing the
cryptocurrency boom and how it is likely to fail. Though we all remember these
are the same banks that could not predict there own downfall in 2008. The underlying
technology is so advanced that even these big banks will hold and buy crypto
currencies or even create there own centralized. For example, South korea had
initially backtracked there decisions to stop servicing cryptocurrency accounts
as crypto investers protested and the government rediscussed its policy (Helms, 2018).
This paper will examine in detail the effects of crypto
currency and how it has proven to be revolutionary. It will also discuss how it
is effecting the financial markets all around the globe. While talking about
its pros and cons and if this revolutionary currency will have a positive or
negative impact on a global scale.