What’s All The Fuss About Crypto?
Cryptocurrency Hits $3T in Market Cap, but HOW?
By Tathagata Ghosh and Hemanth Madduri
A few years ago, if one had mentioned the term “cryptocurrency”, then it would occur to someone some kind of currency involving an underworld banking system, with hooded traders sitting behind shady computers.
These days people all over the internet are engrossed about crypto-currencies and NFT’s and how it will be our future and may revolutionize our entire existence, while others say it might disrupt our economy and may cause an economic crisis. Now reading this, one is infatuated by the concept of what’s crypto, why it’s always on the headlines? To understand the situation, we will first ask over selves what a crypto currency is?
Crypto-Currency
Let’s explain in simple words legible to a lay man which states that, A cryptocurrency is a digital or virtual currency that is secured by encoding the data (aka cryptography), this makes it nearly impossible to counterfeit or double-spend. For someone who doesn’t understand what’s cryptography is, it can be said that it’s a practice and study of technologies and mathematical concepts to improve secure communication without any adversities. Here, it works on the method of storing an online distributed ledger secured using cryptography to authenticate transactions.
Much of the interest these days in crypto currency is because of its unregulated ability to trade for profits. This is nearly like the stock market, which is a discussion of tomorrow. Even The most popular cryptocurrency, bitcoin, has had volatile price moves this year, reaching nearly $65,000 in April before losing nearly half its value in May. There are even more than 13,000 different cryptocurrencies that are traded publicly according to CoinMarketCap.com.
Non-Fungible Token (NFT)
A NFT functions like a cryptographic token, but unlike cryptocurrencies, NFTs are not mutually interchangeable, hence not fungible. While all bitcoins are equal, a same NFT may represent a different asset with a different value. An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. They are usually used to get some basic usage rights of virtual copyrighted information; support the artists you like etc.
Anyone can view the individual images — or even the entire collage of images online for free. So why are people willing to spend millions on something they could easily screenshot or download?
The value of an NFT depends on the scarcity of the product it represents and often that are tokenized. Because an NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collector’s value those “digital bragging rights” almost more than the item itself.
How does this Work?
These technologies work on the basis of Blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. In simple words, a blockchain is a type of distributed ledgers that stores the records of a transaction across various locations to authenticate the transactions. This works on the basis of a list of transaction shared by everyone in the blockchain network randomly to authenticate the transaction. This is formed as a secure transaction because one cannot directly change a transaction record to authenticate a transaction it needs to be changed on various devices (having the same network or token related to the blockchain involved) across the internet for a transaction to be successful, this has proven to be an effective and secure method than having a large server with all the list of transactions as held by a bank. When people buy more of these said crypto currencies. Hence, the said market capital and volume of transaction of a crypto-currency increases, this effectively drives the value of those currencies, thus the high demand of currencies these days.
Price
If demand increases faster than supply, the price goes up. For example, if there’s a drought, the price of grain and produce increases if demand doesn’t change. The same supply and demand principle applies to cryptocurrencies. The supply of a cryptocurrency is always known.
Why is the Demand High?
Well demand increases as awareness increases, and as awareness increases potential buyers want to invest in it to secure their position in the market, also Broader adoption of a cryptocurrency as an investment also increases demand while effectively limiting the circulating supply. Cryptocurrencies work as a way to appeal the consumers or investors for a different number of reasons, some of them are like:
- People see crypto as a new form of modern currency and are racing to buy more presumably before they become more valuable to not only counter the inflammation but also earn over the bar profits
- Some see them as more secure form of transaction and want to invest in the development of future of digital economy.
- Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.
Well, this is an engineering news outlet, and what has stock exchange has to do with it so let’s see what are the new technologies advancing in cryptocurrencies are.
DeFi
It comes amid growing excitement about DeFi, or decentralized finance, a new trend in the crypto market which seeks to build financial applications like lending and trading on the blockchain. Ethereum is a key player in DeFi. Some of the biggest DeFi services, including decentralized exchange Uniswap and lending platform Aave, run on the Ethereum network. Still, DeFi has caught the attention of regulators lately, and experts have warned a crackdown is imminent.
Artificial Intelligence
Blockchains of verified data moving through multi-organizational networks are a literal smorgasbord for AI. By unleashing AI and machine learning algorithms onto the river of data flowing through both private and public blockchains, companies will be able to unearth patterns they’d never have identified otherwise.
One can say there are so many blockchain technologies that, it’s not possible to list them here, interested people can do their research by following up with the links at last.
Metaverse
Well, if you have been reading our newsletter, we have done an article on the transition of Facebook to Meta and the start of Metaverse. The newfound prominence of the Metaverse has led to heightened scrutiny, with some observers rolling their eyes at what they perceive to be the tech industry’s latest buzzword du jour. This transition also has something to do with cryptocurrency, now people understanding about metaverse and a new market place it provides for developers and other content creators can understand that there needs to be a form of currency in the metaverse. Cryptocurrency and the metaverse are more correlated to each other than many realize. The term metaverse dates back to the 1992 sci-fi book Snow Crash by Neal Stephenson. And as the internet has grown, a currency built for the exchange of digital assets was the original idea behind Bitcoin (CRYPTO:BTC). Bitcoin’s rise has spawned thousands of other “altcoins” and blockchain networks, many of which try to solve various pain points in the digital economy. Take, for instance, MANA, the native token of Decentral and, a one-stop destination for buying virtual assets, estates, lands, and more, which jumped almost 400 percent to hit an all-time high. Virtual-reality platform Sandbox, which is built on Ethereum and empowers the users to create, build and monetize their virtual experiences, which saw its SAND token surge to a 7-day high of almost 300 percent.
Welcome to the world of metaverse!
In the physical world, you transact using fiat currency, which acts as a store of value and a medium of exchange for buying or selling anything you want. But in your virtual world, how do you think you will pay for buying your painting, land, and paying for that Taylor Swift’s concert in a seamless, instantaneous manner? The answer is simple- Crypto!
It is almost impossible to imagine the metaverse, the other, just-as-real world, operating without cryptocurrency. In a world where speed, transparency, and security are almost fundamental, crypto becomes a necessity rather than an option. At its heart, cryptocurrency is the perfect medium of exchange for this exponentially emerging hybrid world.
If we Think about it for a minute. First, prompt and swift, and frequent transactions, like selling your vintage and immediately buying a new one, or even getting your hands on that NFT needs decentralization and transparency, where the power to approve and validate your desirous transactions rests with not just one centralized authority or hub, but rather with every participant in the network collectively, making it more democratic, accessible and quick! You do not repose your trust just in a single person. Secondly, operating on a public ledger like blockchain, where every transaction you undertake is irreversible, traceable, and secure, you can be assured that your funds are safe, given that cryptocurrencies like bitcoin employ highly sophisticated cryptography technology for encryption and fund protection
Basically, we are in the early experimentation phase for cryptos and the metaverse, this being just one such experimentation by the company formerly known as Facebook. But if Meta Platforms pulls off its aspirations, it could have one of the most robust computing platforms encompassing video games and apps, a payments and asset security system, and all the supporting infrastructure behind it by the end of the 2020s.
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