Cryptocurrency explained

A cryptocurrency is a digital or virtual currency, secured by cryptography. Its purpose is similar to physical currency, which is to act as a medium of exchange. Cryptocurrencies are digital assets that are stored on computer databases. These digital coins are recorded in digital ledgers using strong cryptography to keep them secure. These ledgers are distributed across a large number of computers. Each transaction made using Cryptocurrency is codified as blocks. Multiple blocks link each other and form a blockchain on the distributed ledger. Due to this decentralized structure, they can exist safely outside of any monetary policy, government interference or manipulation. Cryptography makes it nearly impossible to counterfeit or double spend the Cryptocurrencies.

In fact the anonymity of transactions and transparency of the recorded data makes it widely popular. Despite the benefits associated, Cryptocurrencies are commonly known as a speculative type of investment asset. The rising price of Cryptocurrencies comes with a speculative bubble.

The 2021 boom followed by a crash reflects the risks associated. Cryptocurrencies are legal in most developed nations. However, it is not issued by the central bank. It's value can get influenced by cost of production, mining process, supply and demand of competing Cryptocurrencies, exchanges it trades on, any governing regulations or restrictions upon it. The high cost of production adds on to one of the major disadvantages.
Many Cryptocurrencies require vast sums of electricity and other resources to mine. There is an additional risk of losing coins if you lose the key. If your hardware fails, you will lose all the tokens and this is non- recoverable. Experts are of the belief that blockchain and related technology will disrupt many industries including finance and law. In addition to this, Cryptocurrencies have 100% digital investors with social media accounts. This has a high potential of a small tweet leading to a crash or a spike. Risks associated will continue to elevate until the Cryptocurrencies are regulated in a similar manner as the fiat currencies.

One of the largest barriers to mainstream/ mass adoption of Cryptocurrencies is the price volatility. Digital assets come with a "Boom and Bust cycle", which is why mere 2% of people are using it. Most Cryptocurrencies have only a fixed supply with uncertainty in their demands. There is a dire need for stability before using Cryptocurrencies as a medium of exchange.

The rise and fall in prices will keep the ordinary people away from using digital currencies. In addition to this, Cryptocurrencies come with unpredictable prices on regular services like remittance, currency conversion and the use of ATMs. Bitcoin ATMs for instance charge around 15% just to convert to fiat currency. With no advantage over government printed money, an average person won't use them. To conclude, people are not yet accustomed to see Cryptocurrencies as fiat money.