Cryptocurrency, as we know, is a digital currency that was introduced in 2009 in the form of Bitcoin. It is managed by cryptography, which is an advanced encryption technique. Prior to 2008, when the concept of blockchain was an academic concept, no one had even imagined that something like this can be invented and will take the world by a storm.
After the introduction of Bitcoin, it started gaining popularity. In April 2013, the value of Bitcoin surged nearly 10 times in a short span of two months. This captured the interests of the investors as well as media. The volatility in cryptocurrency was to such an extent that it can increase or plunge by 50% from its peak in a very short period. Some analysts feel that the volatility of cryptocurrencies has the potential to make twists and turns that can create turbulence of equity markets while the global financial crisis looks docile.
In such a volatile scenario, it is but natural that the question regarding the future of this digital currency will emerge. People will want to know: will it supplant the conventional currencies and can be used as the hedge in case the dollar or Euro weakens in future. Or, is it just a fad, which has a short life and will pass away eventually?
As of now, the market of cryptocurrencies is going fast and wild. After Bitcoin, many new cryptocurrencies have emerged with new hopes and new promises. Only a few have survived so far with Bitcoin still holding the fort as the most valuable digital currency. The rest have been dumped and the last bag holder has lost all hope to ever see a return on the investment made.
The technology used in cryptocurrencies is robust and secure and thus this currency can be the future. But, there are few limitations of these currencies at present that needs to be fixed. The first is the speed at which transactions take place. Currently, a small number of people deal with it, but as the number increases it will be difficult to get the transactions through at this speed.
What if the computer system crashes? As it will be a digital fortune, it will be erased in a flash. Again, as of now, technology is considered to befool-proof, but you can never underestimate the potential of the human mind. There might emerge someone who will find a way to ransack the virtual vault.
If they start replacing the conventional currencies, they will start attracting various kinds of regulations and government scrutinizes. This will erode the fundamental premise of their existence.
The transactions in digital currencies are more complex than dealing with conventional currencies. As it needs slight technological adaptability, it is likely to deter many. This will be a major roadblock if cryptocurrency aspires to become a part of the mainstream financial system. To make it viable for the masses to understand it, it needs to be easy for the consumers but complex and hard to crack for the hackers, which is a tough balance to maintain.
There are many other problem areas too like darknet uses the digital currency mode for nefarious activities.
This technology is no doubt revolutionary and has the potential to become the dawn of new economy. However, there are many challenges and only time will tell what lies in the future of cryptocurrency.