Cryptocurrency is a characteristically decentralised currency. This means that cryptocurrency is not dictated or controlled by any government or bank. The benefits of decentralisation solve several issues people have with the current centralised financial systems in place.
Several people have issues trusting the government and banks to have complete control over their hard-earned money. The networking system of cryptocurrency has many nodes, thus allowing for more transparency and directness in its inner workings. This facilitates multiple spaces to allow a single point of error to be irrelevant in the overall network.
These benefits also come with their own set of shortcomings. Having multiple nodes in a network also allows for a more hackable system. While there are people working to make sure any illegal activity is kept at a minimum, having a system this spread out makes it much easier for hackers.
A decentralised system requires the trader to have complete trust in the cryptocurrency, as well as the other traders. One big problem that can come from cryptocurrency’s decentralisation is the heavy fluctuation of the prices. Good days and bad days are not far apart for cryptocurrency.
Due to a lack of trading regulation, the drop of prices can come just as quickly as they rise. There are no minimum or maximum to the movement of the initial coin offering or the initial public offering.
Importance Of Regulation For Cryptocurrency In The Future?
The reality of cryptocurrency is that it is extremely difficult to predict the price and value of a certain currency, especially over a longer period of time. To determine the long-term value of cryptocurrencies, one would need to take several critical external factors. A more obvious factor is the overall safety of investing in a particular cryptocurrency.
The safer people feel spending and investing in a cryptocurrency, the more people will buy into it. A system’s safety is always at risk, and this risk can either increase or decrease over time.
Another key factor in the longevity of a cryptocurrency is its usability. The real-world application and spendability of any currency is its most important attribute. If a currency gains mass adoption through its usability, the demand for it will rise.
Because the value of cryptocurrency is dependent on the number of users, higher demand for it will increase its value. This works the other way as well. If the people do not well adopt a currency, there would be no demand for it, resulting in a minimal value.
The last external factor is the inflation of fiat currencies and the performance of other cryptocurrencies. A big selling point for cryptocurrency is the inflation of fiat currencies. This lack of transparency to an everyday person, in regards to changes in the value of a country’s currency, is a huge issue within these communities.
Cryptocurrency, however, do away with that by being decentralised and sells itself with this characteristic. That is why when the value of the fiat currency drops, the value of cryptocurrencies rises. Similarly, there is competition between the different cryptocurrencies.
Safety and usability are selling points and means to increase the value of a particular cryptocurrency. If one cryptocurrency sees a large rise in value, it will take a percentage of the market, which is being taken away from other cryptocurrencies.
Stricter regulation may be the next step in making cryptocurrency more reliable. Using this control to properly plot the cryptocurrency values trends would increase exchanges by showing concrete evidence of a cryptocurrency’s rising value.
Cryptocurrency is also very limited in how much the system is allowed to mine and release over a period of time. With the possibility of being fully mined over a few decades, the sustainability of cryptocurrency will depend on regulating the usage and value of cryptocurrencies in communities. However, regulating something decentralised can come with its own set of issues.
So there you have it. Now you know how important will regulation be for cryptocurrency in the future. If you have any questions regarding this topic, ask them in the comment section below.