Bitcoin is an amazing idea and an interesting digital currency. A year ago, I spent some time researching various cryptocurrencies and understanding how they operate. Of course, Bitcoin is the leader and the value of Bitcoin has been volatile as late with prices soaring up to the value of gold. That is crazy to think about. All of this has me wondering what the world will be like as more and more of these currencies emerge. One digital currency is enough, but there are many more coming onto the market. Most are based on some form of cryptographic or mathematical operation on a ledger of transactions or providing cycles of CPU/GPU to donate to worthy causes, such as cancer research.
With so many currencies emerging, what will still mean for the financial world? Frankly, my opinion is that it will have no major impact. Except for the currencies, such as Bitcoin, that become major players, I don’t see any issues. This is mainly because there are already so many currencies around. Every country has a currency and there are some currencies that span countries. The financial markets learned how to deal with many currencies long ago and established exchanges to make the exchange of currencies more easily processed. Regardless of whether your currency is held in a bank or a digital wallet, it works the same as any other currency in actuality.
I think one of the questions to be asked is why so many new currencies are emerging. Bitcoin started a movement, for sure. I think one of the big reasons for the explosion of new digital currencies is the fact that the average joe is no longer able to mine and find any value with Bitcoin. In the early days, when the block chain was much smaller, the average computer could crunch numbers working the chain and eventually earn a coin. Then, the process required GPUs which had the ability to process much faster. Along the way, the time and resources required to get a return continued to increase. Now, Bitcoin can only be mined successfully using RISC-based processors designed specifically for the purpose. Most people who are still mining have joined online mining communities where they pay to mine and are able to actually bank some coins.
As smaller currencies pop up, they are offering much smaller chains to work or they are built on a different foundation, for example, providing coins for processing time donated towards solving complex scientific problems or working for a cure to diseases. Some of these appeal to users based on the cause, while most offer a way to more quickly receive a return o. Investment. However, none of these other currencies has value like a Bitcoin, so stacking up a bunch of worthless coins is not really helping you much. Overall, I contend that there will be no major impact to the financial market at large except for the cryptocurrencies forcing the markets to take notice.