Cryptocurrency has recently exploded in popularity. It is no longer the oddity of tech heads; cryptocurrencies are being purchased by regular investors, big businesses, and hedge funds. This surge in popularity has driven the value of popular cryptocurrencies such as Bitcoin and Ethereum sky high. Whether you’re excited or skeptical about crypto, you will likely be hearing much more about it in the coming years.
A variety of factors are contributing to cryptocurrency’s rise in popularity. For one, the methods of mining, that is, generating new cryptocurrency, is easy and accessible. Anyone can mine crypto by having their computer run a series of complex mathematical computations for an algorithm. When the calculations are complete, the miner is rewarded with crypto. This low barrier of entry has many people interested in generating the currency themselves. Another factor fueling crypto’s rise in popularity is its potential as a legitimate investment strategy. Regular investors are becoming interested in cryptocurrencies as an investment strategy due to their extremely rapid increase in value, which can number in the hundreds or thousands of percent depending on the crypto.
Due to the ease of accessibility and soaring prices, mining is a popular option for earning cryptocurrencies. However, this demands a ton of electricity. Without the widespread adoption of renewable energy, for example, residential solar panels, mining isn’t very sustainable and could lead to the shedding of crypto altogether. Some crypto, notably Ethereum, are shifting from mining to staking as a way to generate the coin. Staking is a method of participating on a crypto’s blockchain (a sort of digital ledger) by using some of your own coins to validate transactions. The reward for doing this is more crypto. Unlike mining, staking barely requires any electricity and thus is far more sustainable in the long-term. With the development of new methodologies like staking, cryptocurrencies are ensuring they have a steady place in the future of commerce.
Many large companies have begun adopting cryptocurrencies for a wide range of usages. Financial giants Visa and Mastercard have incorporated cryptocurrencies into their payment networks to varying extents. This move has the potential to affect all businesses which utilize Visa and Mastercard systems, which is most businesses in the United States. PayPal also allows transactions via certain cryptocurrencies. Companies in many different sectors are investing millions into cryptocurrencies as both an investment and an option for paying or rewarding employees. Coinbase, one of the largest cryptocurrency exchanges in the world, has had a highly successful initial public offering, further legitimizing both investors’ and corporate belief in the currency. With acceptance from big business, it is difficult to imagine crypto going anywhere anytime soon.
While cryptocurrencies have mostly been drastically rising in price, they occasionally experience massive drops in value. This volatility can spook many would-be investors away from taking the plunge. As cryptocurrencies continue to be mined, however, this will become less of a problem. That is because most mainstream cryptocurrencies have a finite amount of currency which can be produced. As mining computations become increasingly complex, it will eventually take far too long for computers to be able to do the calculations. Since there is no government entity issuing new currency, this computational hurdle effectively caps the amount of cryptocurrency that can exist. As coins reach their maximum, prices will theoretically stabilize. In addition, there will be relatively little inflation since the money supply will cease increasing. As prices become more stable, businesses and wary investors will be able to reasonably assume that the currency will maintain its value and would therefore drive mainstream adoption of cryptocurrencies even further.
Cryptocurrency is here to stay. It has the approval of new investors, big business, and existing financial institutions. Both the increasing sustainability of production and stabilization of prices work to calm fears about its long-term feasibility. Expect to see more cryptocurrency options in the future as the new financial technology is incorporated into more and more payment systems.