In Parts 1 & 2 of this series, you gained extensive knowledge of various features, characteristics, and popular cryptos while learning the best practices and guidelines for crypto trading and investing. Well, in this final part of the series, you will learn about the key challenges to be addressed and the future trends likely to occur in the crypto space.
With the fundamental information gathered in the earlier parts, you will be able to understand and analyze these challenges and appreciate the trends better.
Cryptocurrency, primarily due to its decentralized nature, remains a bone of contention for most countries. Regardless of its features like immutability, security, and speed, it suffers from the problem of a slow adoption rate. At present, there are around 56 countries globally that accept and allow transactions with cryptocurrency. Two nations namely El Salvador and the Central African Republic (CAR) have accepted Bitcoin and adopted it as their legal tender.
On the flip side, there are some conservatives like China, where crypto transactions are banned. Nevertheless, the crypto space shows no signs of slowing down, and several nations are already planning to frame regulatory guidelines to pave the road to adoption.
Due to various scams that recently occurred, the credibility and robustness of the technology are in question. While investors continue with their buy and sell operations, the cloud lingers on how safe the money is.
This is mainly because these assets are not backed by legal or governmental regulations. That said, government-implemented policies certainly will influence the crypto space.
First, government policies can impose restrictions and make an asset scarce, increasing its value like gold. Second, they can control the prices of the crypto coins, which would considerably reduce dramatic fluctuations or market meltdowns.
Know Your Customer or KYC is the first step towards combating money laundering and fraud. Most crypto exchanges enforce KYC by ensuring the following:
In the case of crypto wallets, only custodial wallets that contain information on the private keys of the customer must comply with KYC.
Some of the benefits of KYC include - reduced legal risks, increased market stability, anti-money laundering practices, and greater transparency.
Quite often, security issues arise due to a lack of adequate measures or negligence. Check out the below points to stay secure with crypto.
They are fraudulent investment schemes that lure investors by showcasing high returns and low risks. In these, the money collected from later investors is used to pay off the earlier investors.
These are scams in the crypto space wherein the investors or users are tricked into divulging their personal information, private keys, or such to the attacker.
Exit scams refer to the acts of developers of a cryptocurrency project to back out, pull the funds, and abandon the project even after it is launched. Their motive is to take away the money from the investors. It starts with the developers aggressively marketing the crypto project to get funds from investors.
Crypto space is already teeming with scams and fraudulent activities. That said, ensuring due diligence is crucial when choosing investments. Follow the guidelines below.
Launched in 2015, Ethereum primarily opened the doors to the world of decentralized finance (DeFi) and Non-fungible tokens (NFTs). DeFi refers to the realm of finance based on emerging technologies like blockchain or decentralized ledgers to execute financial transactions.
The idea is to eliminate the need for intermediaries or third parties like banks or financial institutions. This functionality helps individuals send and receive payments, borrow and lend loans, gifting, and other jobs with ease.
Non-fungible tokens are digital assets secured on a blockchain. Any piece of art, collectible, or any item can be turned into an NFT using a process known as minting. The NFT has a unique ID and metadata, which is linked to the owner’s private key, and thus one can enjoy the ownership rights of that piece.
NFTs led to the ideas of fractionalization and democratization of real-world assets.
Beyond finance, blockchains offer other useful applications. Some of these are:
In the medical space, professionals can connect the patient records systems to blockchain, which will ensure a single view highlighting all information on a particular patient is displayed to anyone in that network.
Blockchains can be used to store and track the academic credentials or documents of students across say a city or a state by forming a network. This would increase transparency and reduce paperwork.
Blockchains help in supply chain processes by aiding in provenance and enhancing the visibility of each stage in the cycle.
Crypto offers tremendous scope in building a secure and robust future for all economies. Through blockchains and cryptocurrency, financial inclusion can be achieved in unbanked economies. Besides, these assets will increase and facilitate cross-border payments, making trades easier. Finally, technologies like decentralized finance will not only ease processes like loan management, payments processing, and such but even result in newer ways to expand the arena of finance.
Lastly, the NFTs, which have revolutionized and redefined the expression of art and collectibles, hold a vast potential to unleash.
We hope that this three-part series titled “Unlocking the World of Cryptocurrency and Blockchain” was packed with useful information on the ever-evolving crypto arena. From the basics of cryptocurrency and investing practices to regulatory framework and use cases of blockchains - we have you covered.
Our objective is to ensure you are all set to get started with this most dynamic space of fintech - crypto investing, delve into the challenges and opportunities in this domain, and make intelligent and informed decisions.