In 2017, the cryptocurrency market experienced a frenzy. Sharp fluctuations in the digital currency's exchange rate led to increased uncertainty and negatively impacted the value of many assets.
Today, three major problems with buying and selling cryptocurrencies have emerged, which are worth paying attention to. What those who have chosen bitcoin and other coins for investment may face, and what consequences need to be feared, read on.
Problem 1. The Blockchain Conundrum
It is worth acknowledging that blockchain lacks scalability for real-time problem-solving.
This system implies transparent transactions, where banking networks act as intermediaries. Blockchain technology allows for faster money and data transfers than financial institutions, which can take up to five days to complete a transaction. Additionally, the system is more responsive to consumer requests in terms of intermediary fees.
Blockchain was conceived with the aim of eliminating all drawbacks: removing banks from financial operations and transferring payments «here and now», while significantly reducing the cost of its services.
The idea itself seems enticing at first glance. Many large companies have ventured to test blockchain technology, often working with demo versions for small projects.
One of the first to try blockchain was the non-profit alliance, Enterprise Ethereum Alliance. The structure, which includes 250 organizations, is testing an open-source version of Ethereum.
But the question remains open: the technology is only used in demo versions and limited projects. High-level complexity tasks with full scalability are not solved through blockchain. International companies are not rushing to adopt it.
What is the problem? Blockchain technology did not become a breakthrough, although it had every chance to. Modern companies, while aiming to transition to digital operations, have not yet abandoned traditional payment systems. They all await proof that blockchain can demonstrate its scalability in solving real-world tasks.
Problem 2. Regulation and «Transparency»
Regulation and Transparency Another major problem in the world of buying and selling cryptocurrency is the regulation of online financial operations. Authorities in some countries have already begun to tightly control the area of digital currency. This issue was particularly acute in January 2018 and affected bitcoin exchanges. For example, South Korea announced that banks must verify the identity of customers who buy or sell bitcoins. Furthermore, financial anonymity is abolished if a customer's account is linked to cryptocurrency.
Similarly, the United States has also tightened sanctions, demanding increased transparency in transactions. In November 2017, the popular cryptocurrency exchange Coinbase suffered. The US Internal Revenue Service (IRS) demanded in court that the exchange provide information on customers who exchanged bitcoins totaling more than $20,000 between 2013 and 2015. It is noted that during this period, only 800-900 individual tax returns confirmed transactions with digital currency. Obviously, US authorities decided to put pressure on those who evade taxes. Regulatory authorities intervened in the situation, and a tax reform law was passed in America, which provided for the closure of such exchanges. This happened at a time when cryptocurrency was at the peak of popularity among investors. Moreover, its main advantage – anonymity – has now been lost. The virtual currency, once considered ideal for libertarians, has lost its former attractiveness.
What is the problem? Cryptocurrency has a future – it will be taken seriously if it is somehow regulated, and transactions with it become as transparent as possible. On the other hand, control undermines the fundamental principle of virtual currency that attracts investors. It is necessary to find a golden mean between regulation and independence to increase the stability of crypto.
Problem 3. Cryptocurrency Mining
World-renowned graphics card manufacturers NVIDIA and Advanced Micro Devices must yield to consumers.
Cryptocurrency mining is reaching new heights every day. It involves people and companies with super-powered computers. The process involves solving mathematical problems using computers, resulting in the creation of virtual currency. Thus, bitcoin (Bitcoin), ether (ETH/USD), Bitcoin Cash (Bitcoin.Cash), and litecoin (LTC/USD) are structured.
Cryptocurrency mining is an intense process that requires significant expenditure on electricity and high-tech equipment. For example, specialized integrated circuits (ASIC miners) are used for bitcoin mining, while graphics processing units are used for mining other digital currencies.
What is the problem? Demand breeds supply: among miners, there is an increased need for purchasing video cards. This has brought colossal profits to companies like NVIDIA and Advanced Micro Devices. However, there is another side to the coin: gamers and businessmen have turned away from manufacturers who significantly inflated the cost of their products. Companies need to develop a further strategy: allow demand to dictate the price and lose loyal customers or launch a line of specialized products – video cards for mining. In any case, business owners will reap the benefits, and consumers will only speculate about what will happen next.
