What’s the hype around cryptocurrency, and is it just a fad?
Updated: Feb 22
I first heard about the phenomenon we know today as cryptocurrency when Bitcoin shot to fame following its release as an open source “blockchain” software back in 2009. And the reason you may also have heard of Bitcoin is because at one time, it enjoyed a whopping 90% of the market. There are over 50 Bitcoin exchanges globally, the largest of which is Coinbase, followed by Coinmama, BitPanda and GDAX.
But as with any technology, if it works, it is soon replicated, and today Bitcoin is just one of many offerings across the global cryptocurrency market. In fact, cryptocurrencies have gained so much traction – there are currently around 20 million users worldwide – that household brands are starting recognise their stability as a currency. Travel giant Expedia, and global fast-food chain Subway, are just two major retailers accepting bitcoins as a method of payment; and with an increasing number of smaller retailers signing up, it could become everyday currency before long.
The rise of the bitcoin
The value of the bitcoin has fluctuated enormously since it first entered the market. Back in 2015, one bitcoin was worth (just!) £130, although today it is worth over £6,400 (that's a 4,800% increase over three years). Interestingly, two-fifths of the world’s bitcoins are owned by just 1,000 individuals – having amassed a fortune of over £50 million each – which means they have a great deal of control over the value of the currency, depending on whether and when they decide to sell up.
The rise of the market
Altcoins (alternative cryptocurrencies) are coins which have emerged following Bitcoin's success, and are generally claimed to be superior by their developers. As I write this, there over 1,600 digital currencies on the market (for example, Ripple, Litecoin, Namecoin, Bytecoin, SwiftCoin, you get the idea), traded across of total of 200 exchanges worldwide. Although completely legal, some currencies, for example Monero, Zcash and PiVX, can be traded pretty much anonymously, leaving them susceptible to fraud as they attract attention across the black market.
The rise of self-mining
By using mining software (and a lot of expensive equipment!), you can mine for coins yourself, although as with any income, any profits made must be declared for tax purposes. It’s probably not for the non-tech-savvy though, having seen for myself the rows and rows of hard discs connected by a never-ending entanglement of wires, buzzing away as they mine for coins while consuming vast amounts of electricity (and therefore probably not doing the environment any favours).
So, is it worth investing in cryptocurrencies?
When the bitcoin was released into circulation, it was stipulated that only a finite number – 21 million – would ever be produced. Therefore in theory, as long as there is interest in investing, the coin should increase in value for the foreseeable future. It will be interesting, though, to see how other altcoins fare, and whether their popularity overshadows that of the mighty bitcoin.