The Current State of Cryptocurrency
It’s been a wild ride for cryptocurrency since Bitcoin (BTC) became the first decentralized digital currency in 2009.
Since then, millions of transactions have been made, millions of dollars have been stolen or lost, and we’ve seen the rise of several new cryptocurrencies with exciting and innovative new technology, and safety measures behind them.
It’s an interesting time for the future of digital currency , but that doesn’t mean there aren’t major hurdles to clear before we ever begin to see any sort of widespread adoption. We’re – mostly – on the right track, but that doesn’t mean there aren’t significant challenges for the fledgling cryptocurrency markets.
While the early days of cryptocurrency were rather notorious due to its widespread usage on dark net sites, such as the – now defunct – Silk Road, we have seen some key mainstream adoption indicators in recent years.
2014 saw a few big wins for cryptocurrency supporters. Each of these wins puts the currency one step closer to widespread adoption, and I doubt anyone would deny that 2014 brought a lot of momentum and awareness of digital currency – or at least Bitcoin – to the forefront.
Record Setting Bitcoin Prices
In the early stages of Bitcoin, you could buy the currency for less than a penny. In fact, one early user – “laszlo” – used 10,000 Bitcoins to make the first real-world transaction with the currency. He bought 2 pizzas for 10,000 BTC. At its peak value, that 10,000 BTC would have been worth over $10-million USD. That’s some expensive pizza.
Over the years, Bitcoin has seen numerous peaks and subsequent crashes. However, 2014 was a wild ride for the coin as prices maxed out at approximately $1,250 USD before taking a sharp plunge into the low $300’s by April of 2014. The currency has continued its downward momentum since then, and currently sits in the $200’s depending on the marketplace source.
Widespread Media Attention
As the price of a single Bitcoin continued to rise, so did its media profile. Major news outlets like CNN, Fox, CNBC, Al Jazeera, and others jumped on the cryptocurrency bandwagon and started reporting about digital currency, the upward trajectory, security concerns, and its ultimate collapse. Since then, we’ve seen a sort of disappearance of Bitcoin and cryptocurrency in the media, but the attention did bring about some awareness for alternative currencies.
Major Retailer Adoption and the Christmas of 2014
In September of 2014, Overstock.com became the first large retailer to accept Bitcoin. After the initial announcement, the dominoes started to fall and many other retailers began to announce their acceptance of the currency for the upcoming Christmas season. Here are just a few of the companies that jumped on the Bitcoin bandwagon that year:
- Dell Computers
- DISH Network
- Tiger Direct
In addition, other major retailers, such as Wal-Mart, Nike and Amazon take Bitcoin (indirectly) through the use of gift cards from companies like: eGifter, Gyft, Giftcard Zen and GiftcardBTC. While there are more stores that won’t accept these cards than those that do, it’s still a positive sign when retailers of this size are accepting Bitcoin – albeit indirectly.
The Rise of Litecoin and Other Alternative Currencies
Until late 2013, it was all about Bitcoin. Other technologies existed in the cryptocurrency space, but none with any real traction or marketshare that came close to that of Bitcoin. In 2013, this began to change, as Litecoin started to gain some real traction, as well as some notable PR. The sudden spike in Litecoin pricing included a 100-percent leap in a single day, as well as a $1-billion USD market cap by the end of 2013. Many started to tout Litecoin as the successor to Bitcoin due to the improved technology and security-related fixes to its supposed predecessor.
The rise of Litecoin planted it firmly in the number two spot, behind industry-leader, Bicoin. This all changed in 2014 when a new kid on the block, Ripple, started to make waves with a change in the core technology behind cryptocurrency and a currency-agnostic approach to the way that cryptocurrency is bought and sold.
The aim of Ripple was to decentralize the exchange points that other services, such as those that Bitcoin relied on to process each transaction. This approach would hypothetically add increased security to each transaction as there was no centralized market to hack, and the liquidity of Ripple allowed multiple ways to buy and to sell the coin, such as: fiat currency (Dollars, Yen, Pesos, Euros, etc.), other forms of cryptocurrency, or technology-related commodity items such as frequent flier miles and mobile minutes.
Strictly speaking, Ripple isn’t a cryptocurrency per se, but rather a decentralized payment network that supports multiple currency exchanges. That said, you can trade Ripple (XRP) like you would any other cryptocurrency, the difference is that it’s relying on other currencies in order to have any real value. This isn’t unlike Bitcoin, which until recently was rather worthless without the ability to cash it out into fiat currency.
Much Cryptocurrency, Many Money, So Doge
Dogecoin is yet another of many new cryptocurrency technologies, but it’s particularly notable due to the press it gained in 2014. The currency itself, which is named after the “Doge” Internet meme featuring a Shiba Inu and seemingly random bits of Comic Sans text, was mostly spurred by its adoption within the Reddit community as a charitable currency for tipping others based on helpful or humorous comments on the site.
Reddit sent the cryptocurrency “to the moon” after using it to raise $50,000 USD to send the Jamaican Bobsled Team to the Sochi Winter Olympics after they qualified, but could not afford to go.
Next, Reddit used the momentum fueled by the media after their Olympic fundraising efforts to raise, and donate 40-million Dogecoin (more than $30,000 USD at the time), before World Water Day on March 22nd. The project was a success, and the money went to funding a well in the Tana river basin in Kenya under the supervision of Charity:Water.
Reddit wasn’t done yet. In March of 2014, the Dogecoin community raised over $50,000 USD to sponsor Nascar Driver, Josh Wise. Wise ran the Aaron’s 499 at Talladega Speedway with a Dogecoin and Reddit sponsored paintjob featuring Doge, and the Reddit mascot, Snoo.
Dogecoin has been a fast mover, but still lacks the widespread adoption of other forms of cryptocurrency, such as Bitcoin, Litecoin and Ripple. It currently sits at the number six spot on the list of cryptocurrencies, in terms of market cap, after peaking as high as third.
It hasn’t been all sunshine and rainbows for cryptocurrencies. There are widespread fears as to the safety and liquidity of owning the digital currencies, as well as what – if any – government regulations will be made.
Mt. Gox Shutdown
The shutdown of the largest cryptocurrency exchange and its subsequent filings for bankruptcy protection were a major blow to the digital currency markets. However, the problems with Mt. Gox didn’t start or end there.
Over its notorious history, Mt. Gox had its share of problems. They ranged from withdrawal freezes, to multiple trading incidents (one which resulted in the price of BTC on the network to temporarily drop to 1 cent), lawsuits, missing or lost coins, and ultimately a seizure of funds by the United States Department of Homeland Security.
After closing the doors for good, stories began to circulate – and were confirmed by Mt. Gox – that over its short history it had lost over 600,000 BTC that could have been worth over $800-million USD depending on when they were lost or stolen.
As Bitcoin soared to record levels at the end of 2013 and beginning of 2014, much of this success was attributed to additional demand in China. By the end of 2013, China started to reverse this trend after fears related to government action induced a panic and large scale sale of Bitcoin back into the open market. This influx of newly available coins led to sharp price drops in the market and a panic sale for many of those outside of China. The Chinese-induced panic was initially caused by China’s Central Bank issuing an order for financial institutions to stop accepting the currency, and further sent the cryptocurrency market spiraling when this ban extended to online payment processors such as YeePay.
As China began to pull out of the Bitcoin market in late 2013, the increased demand led to the price of each coin falling to approximately $300 USD by April of 2014.
Where Do We Go From Here?
Apple Pay and Google Wallet continues to improve, the future of cryptocurrency begins to look a lot brighter. One of the major hurdles to widespread adoption is the lack of a physical form of payment such as cash or a credit card, and instead relying on a digital transaction to purchase goods from brick and mortar retailers. As digital wallet adoption increases (if and when that happens) and more people become comfortable with the idea of digital wallets that process cash and credit card transaction instantly, currencies such as Bitcoin become infinitely more viable.
The future of cryptocurrency is exciting, but in order to ever reach mainstream consumer adoption, many things still have to happen, such as: increased retail adoption, trust in digital wallets , and improvements to security in cryptocurrency protocols. If, and only if, all of these things happen, cryptocurrency could just take over the world.