In the early days of its launch just last year, several thousand bitcoins were used to buy a nachos. Consequently, the cryptocurrency's meteoric rise to US$65, 000 in April 2021, after its heart-stopping drop in mid-2018 by about 60 to 70 percent to around US$6, 000, boggles the mind of many people -- cyptocurrency investors, traders or just the plain curious who missed the boat.
How it all began
Remember discontentment with the current financial system gave rise to the development of the digital currency. The development of this cryptocurrency is based on blockchain technology by Satoshi Nakamoto, a pseudonym apparently used by a developer or group of developers. Notwithstanding the many opinions predicting the death of cryptocurrency, bitcoin's performance has inspired many other digital currencies, especially in recent years. uniswap The success with crowdfunding brought on by the blockchain throwing up also attracted those out to scam the naive public and this has come to the attention of regulators.
Beyond bitcoin
Bitcoin has inspired the launching of many other digital currencies, There are currently more than 1, 000 versions of digital coins or tokens. Not all the same and their values vary greatly, as do their liquidity.
Coins, altcoins and tokens
It would suffice at this point to say there are fine dissimilarities between coins, altcoins and tokens. Altcoins or alternative coins generally describes other than the preliminary bitcoin, although altcoins like ethereum, litecoin, ripple, dogecoin and go are regarded as in the 'main' family of coins, meaning they are traded in in more cryptocurrency transactions.
Coins serve as a currency or store of value whereas tokens offer asset or utility uses, an example being a blockchain service for supply company management to verify and track wine products from winery to the consumer. An argument to note is that tokens or coins with low value offer upside opportunities but do not expect similar meteoric increases like bitcoin. To explain, the lesser known tokens may be easy to buy but may be difficult to sell.
Before getting into a cryptocurrency, begin by studying the value proposition and technological considerations viz-a-viz the commercial strategies outlined in the white paper associated with each initial coin offering or ICO.
For those familiar with stocks and shares, it is not unlike initial public offering or IPO. However, IPOs are issued by companies with tangible assets and a business track record. It is all done within a regulated environment. On the other hand, an ICO is based purely on an idea planned in a white paper by a business -- yet to be in operation and without assets -- that is looking for funds to start up.
Unregulated, so buyers beware
'One cannot regulated what is unknown' probably amounts in the situation with digital currency. Regulators and regulations are still trying to catch up with cryptocurrencies which are continuously evolving. The golden rule in the crypto space is 'caveat emptor', allow buyer beware.
Some countries are keeping an open mind using a hands-off policy for cryptocurrencies and blockchain applications, while keeping an eye on outright scams. Yet there are regulators in other countries more concerned with the cons than pros of digital money. Regulators generally realise the need to strike a balance and some will be using existing laws on securities in order to have a handle on the many flavours of cryptocurrencies globally.
