Will cryptocurrencies ever overtake conventional currencies?
Cryptocurrency

Will cryptocurrencies ever overtake conventional currencies?

There’s no denying the fact that cryptocurrencies have taken the world by storm in recent years. They’ve gathered a significant amount of interest because they use cryptography and decentralized processes as a way to improve the security of financial transactions.

Bitcoin is, of course, the most famous and widely used cryptocurrency. Founded in 2009, it was the first to implement a blockchain-based distributed ledger system, replacing the need for central banking mechanisms. Nearly a decade later, many different digital currencies have emerged around the globe.

Discussion around cryptocurrencies - particularly Bitcoin - is often mixed. Although many people believe that they could result in a more transparent financial system, others say they’re extremely dangerous – for example, the anonymous nature of cryptocurrencies has made them perfect for money laundering. And speaking last month, tech billionaire Bill Gates even suggested that they can be deadly.

Cryptocurrencies are also volatile; in late 2017, the value of Bitcoin alone surpassed $20,000, but it has since declined. Despite this, people are still voicing support for digital cash. Twitter CEO Jack Dorsey recently predicted that Bitcoin will become the world’s main currency within the next decade. But is this really possible, and can cryptocurrencies really be trusted on this scale?

 

Unique opportunity for crooks

For many criminals, cryptocurrency technology is an easy way to send large sums of illegal money across the world and hide it away from the authorities. Max Heinemeyer, director of threat hunting at cyber security firm Darktrace, said that crooks are now using computer hardware to mine cryptocurrencies and that police officials can’t do much to stop this.

“There used to be a money trail that law-enforcement could trace back to offenders. Cryptocurrencies allow anonymous monetary transactions, basically eliminating the traceable money trail that was the biggest challenge for a lot of cyber-criminals in the past. Criminals are notoriously adaptable and will follow the money wherever it goes, leading to an increase in the popularity of cryptojacking,” he says.

“From a cyber security perspective there can be no doubt that the combination of altcoins being mineable on commodity hardware, the fact that mining is now becoming profitable as a side-effect of Bitcoin’s rise, and a maturity in cryptocurrency-related tech has led to a surge in cryptocurrency-related attacks. Cryptocurrency mining might not be as profitable as ransomware is upfront, but it can be secretly pursued for months without creating the havoc that characterizes ransomware attacks.”

To Heinemeyer, the reality is that crypto-jacking devices bypass the majority of defence systems, making them untraceable. He adds, “Most users and security products won’t notice a cryptocurrency miner being installed on a corporate device as it does not show obvious threats or messages to a user, except for an occasional increase in the rate of the fan on your computer. Revolutionary technologies like cryptocurrencies have both their dark and light aspects. For all of the creative energy released by the blockchain revolution, Bitcoin and its alternatives have quickly become the universal currency of the criminal underworld.”

 

Digging beneath the surface

Tim Coates, managing consultant of global financial services provider Synechron, says that cryptocurrencies can only enter the mainstream if investors are reassured by cohesive regulations. “Much of the discussion currently surrounding cryptocurrencies is fixated on either how volatile they are, or their lack of regulation, both of which make the prospect of investing in cryptocurrencies risky. For these digital currencies to be a standard form of payment, generating investment from both investors and the wider industry, investors need greater clarity from the regulator on its approach to cryptocurrencies,” he says.

Clearly, cryptocurrencies aren’t without their challenges, and Coates understands that these may put companies off from investing in them. However, he says that blockchain - which is seen as the backbone of Bitcoin and other digital cash systems - is more likely to be embraced by the masses. “It’s important that even if firms are choosing not to invest in cryptocurrencies that they don’t overlook the technology behind them - blockchain. Currently, we are only seeing a handful of the most agile and innovative institutions investing in blockchain,” he explains.

“This investment is predominantly at the enterprise level, with firms using the technology to streamline processes like custody and clearing, however companies who choose to invest in blockchain now will be at an advantage should cryptocurrencies become a universally accepted method of payment. Those who invest now will be well equipped to process and accept cryptocurrencies as payment if, and when, they enter the mainstream.”

 

Regulation is needed

David Sapper, chief operating officer of cryptocurrency trading platform Blockbid, says that cryptocurrencies are constantly maturing and are extremely lucrative in the business world. But he notes that they’re increasingly attracting interest from cyber criminals at the same time. “Completely digital and constructed using blockchain technology, cryptocurrencies are a new means of raising capital for funding new or existing business ventures. However, as such it means they inevitably attract scammers looking to take advantage of the eagerness of would be investors,” he says.

He describes the rise of crypto scammers as a “real challenge” and urges governments to keep bringing in new laws to fight them. “Regulation is needed to prevent such scammers finding any kind of success. A taskforce in the UK has recently been announced to analyze the risks and rewards of using crypto – this is a welcome step and one that should see trust in the asset class grow,” adds Sapper.

Nicolas Van Hoorde, CEO and co-founder of cryptocurrency tracking app Delta, said it’s “unrealistic” and “highly unlikely” that the world will one day have a single currency. However, he expects cryptocurrencies to keep on evolving. “As we have witnessed in the past few months, the crypto market moves at lightning speed. Therefore, with added regulatory pressure, we expect to see the cryptocurrency market transform meaning we’ll continue to see many digital coins come and go until the market matures and stabilises over the next ten years,” he says.

Hoorde says that the continued success of cryptocurrencies will come down to strong leadership. “Ultimately just like any other sector, the market needs strong industry leaders and not a market monopoly from any particular currency. To keep the market safe, it’s always good to encourage healthy competition. We expect to see the market minimize risk itself as many exchanges and cryptocurrency companies take a closer look at themselves to prepare for what is to come. So, we may just end up with a different form, or a well-developed version, of these currencies in ten years’ time,” he concludes.        

Overall, it’s fair to say that cryptocurrencies present a double-edge sword. While they can help businesses speed up financial processes by cutting out the middleman, there’s no shying away from the fact that they’re seen as assets by criminal groups. If they’re to keep on succeeding, more effective regulation will be needed. Only then can people truly realize the benefits of digital cash.

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Nicholas Fearn

Nicholas is a technology journalist from the Welsh valleys. He's written for a plethora of respected media sources, including The Next Web, Techradar, Gizmodo, Lifehacker, TrustedReviews, Alphr, TechWeekEurope and Mail Online, and edits Wales's leading tech publication. When he's not geeking out over Game of Thrones, he's investigating ways tech can change our lives in many different ways.

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