Is the bitcoin buzz a bubble or a bonanza?

Last year ended with a lively debate on cryptocurrency. In this debate, the world famous cryptocurrency — bitcoin — hogged much of the airtime. The digital currency’s price soared to 1,400 per cent, attracting headlines around the world. On Google search, bitcoin was one of the most searched words; probably due to curiosity that shrouds this currency.

Bitcoin is a digital currency, also known as cryptocurrency. It offers the promise of lower transaction fees than traditional online payment mechanisms. Unlike government issued currencies, cryptocurrencies are operated by a decentralised authority.

In 2018, the bitcoin buzz is predicted to remain on the lips of analysts and on the keypads of tech-savvy businessmen.

So let’s first break-down these tech terms. Blockchain underpins cryptocurrencies; but what is blockchain? The blockchain simply means a chain of web-based records, literally, a ledger. It keeps track of the balances for all users and updates them as money — such as bitcoin — changes hands. A block is the “current” part of a blockchain, which records some, or all, of the recent transactions. Once completed, the transaction goes into the blockchain as a permanent database.

The fundamental tenets of blockchain is that all parties agree when a transaction occurs; they agree on the identities of the individuals participating in the transaction, and they all agree on the time of the transaction.

One of the accepted virtues of blockchain is that it creates a permanent, immutable ledger or record of transactions; they are not subject to dispute and the evidence of the transaction is unchangeable.

Used as a currency, traders send and receive bitcoins in exchange for goods and services. Investors use the bitcoin software to create a “wallet” from which they can send and receive bitcoins. The bitcoin network is free to join and is unregulated.

Some pundits have predicted that cryptocurrencies are a bubble waiting to burst. Towards the end of 2017, the value of bitcoin started to plummet and now crypto watchers predict that bitcoin price will keep fluctuating in 2018. Those who jumped into the bandwagon early in 2017, however, had more than 1,400 per cent return on their investment.

Some analysts argue that cryptocurrencies are here to stay and represent the future of storing value. In fact, some say that by 2027 a single bitcoin will be worth more than $100,000. This means that this is just the right time to buy this currency. They, however, anticipate increased oversight from Central Bank and governments.

Whereas Kenya’s Central Bank has advised people to trend and trade cautiously on cryptocurrency, South Korea and Japan have legalised the use of bitcoins in making payments.

No doubt there will be a rise in the number of people using cryptocurrencies but there are many things that have to go in the right direction for the growth of the crypto industry. One of them is security.

Security is the main concern that haunts the crypto industry. Bitcoin’s underpinning blockchain technology itself is currently secure. However, exchanges and wallets are not, and are a favourite target of cybercriminals.

If the growth in cryptocurrency continues, we expect to see more countries’ central banks experiment with blockchain implementations of national currencies or internal ledger systems.

Governments have long been concerned about bitcoin’s role in tax evasion, money laundering and organised crime. Whatever happens to bitcoin and other cryptocurrencies, the writing is clear; crypto revolution is underway.

Many bitcoin fans believe it will become a true global currency, one that you could spend the same way you’d use Visa today. Few people envision that happening soon, but if and when it happens, it might be the end of bitcoin’s huge price surge.