Deciphering Cryptocurrency –


Ask 10 different people about what they think about cryptocurrencies, and you'll get 10 different answers.

Known to be highly secure and decentralized virtual currencies, they experienced wild fluctuations of value while bulls and bears led it into the virtual market. Only in the first half of 2018, the value of a single Bitcoin – one of the best known and known cryptocurrencies – reached a minimum of $ 6,070 and a maximum of $ 17,094.

Price points aside, the very idea of ​​cryptocurrencies the role in the global market is a kind of philosophical debate. Is it a vaguely regulated global currency – one that cuts off banks that traditionally play the role of intermediaries – a clear and revolutionary next step for our increasingly globalized world? Or is it a risky new adventure waiting to trap those who do not understand it?

Some experts are eager to adhere to the potential of the idea. Microsoft magnate Bill Gates told Bloomberg that Bitcoin is "better than [traditional] currency," said Al Gore, at the Innovation Project 2013 conference, which was a "big Bitcoin fan" and the Former Federal Reserve Chairman Ben Bernanke said in a 2013 letter to Congress that virtual currencies "can hold a long-term promise."

So, of course, there are detractors. Janet Yellen, also a former head of the Federal Reserve, warned at a conference in 2017 that she thinks that cryptocurrencies "will end badly". The billionaire investor Warren Buffett also predicted fate, referring to Forbes: "I think he will implode."

Why is there such a clear division on the fate of Bitcoin in particular and cryptocurrency in general? Perhaps comedian John Oliver came across the underlying truth when he described digital currencies as "everything you do not understand about money combined with everything you do not understand about computers" in his show, "Last Week Tonight". Just like any investment, investing in cryptocurrencies based solely on speculation can be dangerous. But investment based on educated decisions can help investors capture value.

The bottom line? Potential investors should inquire about exactly what their money is buying when it comes to cryptocurrencies.

The Origin Story

While cryptocurrencies have only recently begun to make their way into the mainstream, they have actually been around for almost a decade. Bitcoin exists since 2009 and its history of origin is shrouded in mystery. Even today, nobody knows who invented Bitcoin. The coin slowly rose to the fore after an anonymous designer, with the pen name Satoshi Nakamoto, published a famous white paper detailing the logic behind Bitcoin and blockchain, the technology that powers it.

It is no coincidence that the mysterious idea of ​​Nakamoto found a strong bond In that period, the scenario of the financial world was strongly distrustful of the main financial institutions. Markets were in the middle of the Great Recession, with prominent individuals pointing their fingers at banks "too big to fail". Investors around the world feared that central bank interventions could devalue traditional currencies worldwide.

In these circumstances, the traders were ready for something different. A peer-to-peer currency free of third-party intermediaries and external regulations was intriguing for those seeking an alternative investment. Thus Bitcoin was born.

The basis for Bitcoin was the fact that, even without a third party, the currency is extremely secure. While a traditional bank holds data in a central repository, blockchain technology allows decentralization of cryptocurrency data. Because data exists on many different computers, it is almost impossible to record.

Initially, cryptocurrency has not generated much interest outside of an online niche community interested in cryptography and processing. Among those who know, Bitcoin has been jokingly defined as "nerd money".

Call him a revenge of the nerds, therefore, someone who invested only $ 100 in Bitcoin in 2010 – when a Bitcoin was worth 6 cents – net of over $ 28 million if they sold their investment at the peak of this year [19659008] The explosion of the "Initial money" initiative

As in any other success story, the incredible growth of cryptocurrencies like Bitcoin has led to a series of imitations that hope to profit from the mania. Using the same Bitcoin blockchain technology, companies began to launch their "Initial Coin Offerings" or ICOs, where investors could enter the ground floor.

Some ICOs really offer an innovative or distinctive twist on cryptocurrencies. The famous Ethereum coin, published in 2014, is one of these. Ethereum is more than just a currency alternative. By building in a programming language that allows users to create "smart contracts", users can transfer money based on predetermined clauses. Today, Ethereum is the second most popular cryptocurrency by market capitalization.

Other currencies, however, are not much more than nearly identical offerings touted by often kitsch marketing campaigns. As long as people kept buying, companies kept releasing all kinds of coins, both those trying to introduce something new to the market, and coins copied with catchy names. The long list of past and present cryptocurrencies includes memorable offers like JesusCoin, Coinye and even PonziCoin.

In both cases, while news about people making millions from Bitcoin and cryptocurrencies traveled, more and more people wanted to jump on the bandwagon. Entrepreneurs and profiteers were ready to satisfy them and the favorable interpretations of the Securities and Exchange Commission (SEC) position on the need to register ICOs as securities made the process of creating a new currency even easier.

"Until the SEC said they believe that ICOs should be registered as security offers, many companies really hoped that tokens and coins were not really securities," says Rebecca DiStefano, a shareholder of Greenberg Traurig in Boca Raton and a member of Blockchain of the Task Force company.

Because those companies in question were not evaluating securities, they refrained from completing registration requirements and other relevant requirements and limitations.

Those liberal interpretations of laws authorized an ICO explosion. Only in 2017, estimates of total funds collected by ICO range anywhere from $ 4 billion to $ 7 billion. There are more than 1,000 different cryptocurrencies. Compare this with only 180 global real world currencies recognized by countries that belong to the United Nations.

Regulators enter

While cryptocurrencies increase in importance, the days of the ICO's Wild West seem to vanish. [19659003] "Many companies were flying under the radar, they were not recording," says DiStefano.

Now things are different, he says: "The SEC has been very, very clear now that an investment in an ICO should be seen as an investment in shares or corporate bonds, just like any other investment in securities, and the company should register the investment with the SEC or explain why it is not required to register or be exempt. "

In some In some cases, the SEC issued subpoenas to companies suspected of conducting ICOs without registering when they due. Several companies have responded by making recessive offers, in which they offer to send money to investors in the light of the citation process

At the state level, Florida officials in particular have also expressed interest in setting up controls on the growing industry. On June 26, Florida Chief Financial Officer Jimmy Patronis issued a statement stating his intention to increase oversight of cryptocurrencies by appointing a head of state cryptocurrency.

"My goal is to keep up with the demand and not discourage innovation while monitoring fraudulent behavior and scams," said Patronis in his statement.

The attitude of balancing innovation with regulation could be the key to preventing the ICO's explosion from all cryptocurrencies.

Christian Martin is the CEO of TeraExchange in New Jersey, a company that launches 11 cryptocurrency indices approved by the Commodity Futures Trading Commission (CFTC). He agrees that there are risks associated with this new process, but believes that the recent steps will help mitigate these risks in the future.

"Regulators and market players are already adopting new rules of the road to protect the process and the advancing participants, and this is certainly welcome," says Martin.

Long-term direction

While cryptocurrencies still increase their fair share of concerns, Martin's optimism about potential future is common. At the same time that Florida intends to increase supervision, for example, state government entities increasingly accept Bitcoin as a form of payment. More recently, in Central Florida, the Seminole County Tax Exporter has said that residents can pay property taxes in Bitcoin.

The list of places where buyers can pay in Bitcoin is longer than a year ago and includes everything from children's schools to pizzerias.

However, some companies that had previously accepted Bitcoin are starting to back down. The popular travel site Expedia accepted Bitcoin for four years until June, when it quietly withdrew the option after the currency went through a period of particularly important fluctuations.

While it is impossible to say when and if the currency will become mainstream, most experts agree that the sector will look very different in 10 years from today.

Perhaps the best analogy with the cryptocurrency market lies in the unpredictable results of the era, suggests Martin. Booms and busts of the period brought great failures for some and great successes for others. While the dot-com bubble sometimes defines the period, the whole process eventually completely reshaped the way the world operates. Now, with cryptocurrency at a crossroads, you might be ready to do the same. O