What Is the Future of Cryptocurrency 2022?

Is Cryptocurrency the Future of Money? 

What is the future of cryptocurrency? To answer this question, it is necessary to look into the recent past. In 2017-2018, the first significant increase in Bitcoin rate took place. Unexpectedly for many, its price was fixed at $20,000. It was then that most investors started to become interested in the future of cryptocurrencies, as the crypto market began to grow almost exponentially.

With the growing popularity of digital assets, the governments of most countries have also become interested in them. Some decided to use the possibilities of the new technology, while others, on the contrary, completely banned it.

Giant capitalization best demonstrates the importance of the digital world. At the same time, the digital world is heterogeneous. There are coins that serve as objects for investment and trading. There are numerous scam projects. 

However, no one disputes the relevance of cryptocurrency, since the digital world has become part of the physical one. They influence each other. Bitcoin and altcoins are predicted to be an alternative to fiat money, and blockchain is predicted to become a traditional financial system.

In 2017, during the first boom in virtual assets, they were considered pyramid schemes. A few years later, the attitude changed. Today, Bitcoin and altcoins are efficient tools for trading and investment. Blockchain-based projects are changing people's attitude towards digital money. This is evident due to the development of non-fungible tokens (NFTs). Celebrities release music, paint pictures, create videos and digitize them. Tokenization of art objects allows you to secure copyright, confirm ownership.

Crypto assets include 2 concepts: coins and tokens. Their difference lies in the blockchain. Coins are based on their own distributed network, tokens are implemented on someone else's. The purpose is also different. Cryptocurrency is a means of payment. Tokens do not always act as a means of payment. Emission is performed one-time at the start of the project. The token serves as a financial instrument and ensures the information security of the blockchain. Cryptocurrency serves other purposes:

Acts as a trading tool for trading.

Serves as an investment.

It is a means of payment.

The scope of tokens is wider. Since 2020, NFT has been a popular destination. Tokenization of assets, their transfer to a digital format provides copyright protection.

Decentralized finance (DeFi) is a huge application for digital assets. It includes lending services, deposits. Tokens ensure the functioning of these systems.

Virtual money is different from traditional payment units. Their advantages include: 

Decentralization – there are no managing and controlling bodies.

Security – cryptographic encryption methods are used.

Anonymity – no one controls transactions, no one asks questions about the origin of assets. At the same time, information about transactions is recorded in the blockchain.

High transaction speed (depends on the features of a distributed network).

Convenience of calculations – there are no intermediaries.

However, some advantages can also be considered disadvantages. For example, the absence of regulatory authorities makes virtual currency convenient for illegal transactions.The irreversibility of the transaction can lead to the loss of coins, for example, with an erroneous address. It cannot be physically canceled, it is inherent in the nature of the blockchain.

To access a cryptocurrency wallet, private keys and a seed phrase are used. If you lose them, the money will be blocked forever. It is impossible to restore the mnemonic phrase or the private key.

The rate of cryptocurrency depends on the trust of users. Coins are not tied to tangible assets (except for stablecoins), their value is influenced by various factors:

News background. Any significant world events can shake or raise the price. For example, a new strain of coronavirus was identified, and the rate went down.

Actions of the official authorities of states in relation to virtual currency. For example, after the Chinese government banned mining operations, the rate of Bitcoin and altcoins fell.

Businessmen, politicians and celebrities influence cryptos’ prices through their comments. 

The main problem is the volatility of cryptocurrencies. Short-term investments can ruin investors. It is recommended to buy virtual money to save capital in the long term, as well as to diversify the portfolio.

The mining of coins for projects based on the Proof of Work (PoW) algorithm has become a serious business in 2021. Users without large investments are not able to earn by mining. This is done by large pools and companies that have access to cheap electricity, resources to buy equipment. Cloud services for mining coins are gaining popularity.

Cryptocurrency Is the Future of Finance? 

How should the future of cryptocurrency be viewed? The digital world has already achieved serious success. It is discussed at the legislative level. Large companies, including financial ones, invest their savings and consider coins to be an effective investment tool. People are making fortunes with Bitcoin and altcoins.

The attitude of the authorities differers. El Salvador was the first among all states to accept Bitcoin as an official currency on a par with the US dollar. Some countries recognize digital assets but consider them a commodity. Others completely legalize coins by defining the status as a means of payment.

At the beginning of 2022, more than 40 countries advocated a ban or partial restriction on the use of digital assets.This happens because of the threat of disruption of the established financial system. In addition, one of the reasons for the ban is the difficulty of monitoring the income of citizens using coins.

If this trend continues, then in the near future even more countries will begin to apply sanctions in the form of administrative or criminal liability for operations with cryptocurrency. The ban may include investing in digital assets, using them to pay for services, trading and accumulation. However, as we see in the example of China, the ban may not be effective. China has banned any operations: mining, buying, owning. Still, citizens of the Middle Kingdom continue to conduct operations with digital coins. To do this, they use a VPN, and also use the services of illegal verification of accounts on exchanges.

Despite the fact that many states oppose digital assets in one way or another, there are also their supporters. For example, El Salvador, Ukraine, the United States and a number of other countries are in favor of legalizing the crypto market. America remains neutral for now.

After the ban on cryptocurrencies, China almost immediately offered a digital yuan. The state distributed money to citizens, and the first testing was quite successful. However, such an outcome devalues the main feature of the cryptocurrency – anonymity. Using the national digital currency, the regulator will automatically assign all transactions to the user. This allows the regulatory authorities to instantly assess the income, expenses and tax deductions of each individual citizen.

What Is the Future of Cryptocurrency and Blockchain? 

What benefits will ordinary people get if blockchain and digital money technology is legalized globally? This will provide a number of new opportunities, for example, users will be able to pay with coins anywhere in the world, making international payments in a few clicks.

Most experts and investors are optimistic about the future of cryptocurrency, as evidenced by the growing capitalization of popular cryptocurrencies every year. In the future, the relevance of cryptocurrencies will be higher, they will be able to exist on a par with fiat money. A number of countries will accept virtual assets as legal tender. However, a full replacement of fiat money with digital money will hardly happen. The public financial system is a too complex mechanism to be entrusted to a decentralized network.