Future of Digital Money

Future of Digital Money
What Digital Money Has in Future for Us?

In this digital age, digital currency was certainly overdue, the gap of which was filled with the arrival of bitcoin. Later, many altcoins, that is,
variations of free open-source bitcoin came into the digital world. Bitcoin continues to lead the world of digital currencies. There are many
reputed personalities around the world who have totally dismissed bitcoin and other digital currencies. On the other hand, the adopters label it
the currency of the future.
Digital currencies have one significant underlying point to eliminate the expensive third-party processors. Banks and credit card companies
keep a major percentage of the actual transaction amount compared with the transaction fees in case of digital currencies. This is not in
benefit to the purchaser and merchant.
Regardless of the extreme comments from various sectors, it is evident that bitcoin has made its mark in the financial sector, and in fact,
gained admiration also. No doubt, bitcoin has its inherent disadvantages, still it is going strong. The new cryptocurrencies and blockchain
platforms are doing fairly well. Who would have imagined that Block.one's blockchain platform called EOSIO raised 4 billion U.S. dollars in its
year-long initial coin offering?
The best part of open-source code and the bitcoin community is in terms of its support to fix the defects and look into additional useful
features. This way, bitcoin and other altcoins continue to evolve. The digital currencies have made their impact due to their inherent
advantages discussed in earlier chapters.
Traders give great importance to the security aspect because of obvious reasons. The digital currency exchanges are not regulated as
compared with their printed currency counterparts. Hackers exploit this loophole of lack of regulation to create disruption. Present regulation of
the digital currencies and exchanges is likely to boost up the trust and security factors, hence increasing the value of digital currencies. This is
expected to help reduce the volatility of bitcoin price the users are facing today.
Will This Surpass Conventional Currencies in Its Value?

Bitcoin shares its attributes with conventional currencies in terms of adoption rates and as a medium of exchange. Bitcoin, as a store of value,
is getting termed as digital gold. It is all speculations that bitcoin will replace the conventional currencies and surpass them in its value and
usage. No one has the authority to say so! Only speculations or predictions.
The current trends indicate bitcoin capturing market worth trillions of dollars in couple of years. Similar to other traditional currencies and
media of exchanges, bitcoin has already made its mark as an additional method of payment.
What if Current Blocks Are All Mined? What Next?

Satoshi Nakamoto, the founder of bitcoin, had put stipulation of 21 million bitcoins, making it a finite supply. There are two paths when all the
bitcoins are mined. First, the supply gets over. Second, the bitcoin community decides to update the underlying algorithm so as to have more
bitcoins.
In case the finite supply reaches, bitcoin miners will not have any rewards for mining anymore. However, their source of earnings will depend
solely on the transaction fees, which may be insufficient compared with present times. With technological changes, one may expect that the
mining hardware will become increasingly smaller in size and lesser in costs. At the same time, an increase in the transaction fees may even
out this loss of mining rewards. The miners process transactions prioritized by the transaction fees. Higher the fees, more likely the miner
processes the transaction. Having said that, the higher transaction fees are expected to keep the network active and running.
Considering the principle of demand and supply, when bitcoin supply will be over, it may result into increase in its value. The creator of bitcoin
saved about million bitcoins in the inception. Not to forget, many miners are having their own big share of bitcoins along with investors.
Blockchain.com has a graph depicting the bitcoins mined from the very inception till today as shown on page 60.
Approximately, 81 percent bitcoins are mined by July 2018. This means there are about 4 million more bitcoins yet to be mined. Based on the
halving rewards, and increasing difficulty, last bitcoin is expected to be mined in 2140 A.D. About 20 percent of bitcoins got lost forever, simply
because the miners did not expect it to reach such a high price.
Blockchain.com has various graphs related to mining information. These graphs display hash rate, hash rate distribution, difficulty, mining
reserve, total transaction fees, and cost per transaction.
Will the Value Keep On Rising?

The value of a commodity increases based on various parameters, with scarcity as one of those. So, in theory, yes, the value will continue to
rise. Satoshi Nakamoto, having the reserve of about a million bitcoins, may change the scenario in an unpredictable manner when the supply
of bitcoins becomes more and more limited and difficult. With all the disadvantages associated with bitcoins, still it continues to rise in value.
The year 2018 noticed a slow growth; in fact, a big decline in the value. However, the value seems to be stabilized by middle of the year. We
must realize that digital currencies are still in the stage of infancy, so it makes even more difficult to make any conclusion with authority.
Will It Crash?
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Even if the bitcoin value declined over a duration of time, it still came back! The speculation of bitcoin crash by leading banks seems to be due
to their vested interests. Bitcoin is strongly about empowering an individual and eliminating the bank. The very presence of bitcoin and its
increasing adoption rate have created a risk for the conventional banks or currencies. With adoption by government and presence of
regulations around bitcoin, by control on scams and volatility, bitcoin is likely going to stay here in the digital era.
The transactions are recorded on the blockchain and cannot simply disappear. Since 2011, there had many a few crashes in bitcoin price, but
only to return stronger. In a long term, still one notices a trend where the price continues to rise despite of the devastating crashes.
What Are Forks?

Considering bitcoin or any cryptocurrency as a software, forks are a change to that software. Wikipedia defines a fork as:
n "what happens when a blockchain diverges into two potential paths forward"
n "a change in protocol" or
n a situation that "occurs when two or more blocks have the same block height"
A fork may be classified such as accidental or intentional, hard or soft, and planned or unplanned. Forking leads to more investment
opportunities. There had been many bitcoin forks in the past, the list of which is generally available on the Internet.
Forking has led to creation of new altcoins, those are variants of the original bitcoin in terms of an additional feature, lack of consensus, or
other factors discussed in this section. The miners race with each other to have their block to get added in the blockchain so as to get mining
rewards. There have been instances where the developers disagreed on what block should get added to the blockchain. If a block was
considered invalid earlier, but later found to be valid, then this is considered as a hard fork. This also includes upgrading the software. On the
other hand, if a block was considered valid earlier, but has been found to be an invalid one, then this is termed as a soft fork. Based on these
factors, Blockchain.com has categorized forks as follows:
n Intentional soft fork
n Unintentional soft fork

n Intentional hard fork
n Unintentional hard fork
From an investor's perspective, a fork may lead to an additional value without any additional investment. At the same time, it reduces the risk
also, as the investor portfolio gets distributed over a multitude of digital currencies those were created due to forking.
What Is a Smart Contract?

Investopedia defines a smart contract as follows:
Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into
lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. Smart
contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a
central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and
irreversible.
The term smart contract had been coined long before the inception of bitcoin. An American cryptographer named Nick Szabo is credited with
the coining of this term. The self-executing contracts work in a similar way as digital currencies operate on the blockchain, in terms of their
digital form, storage, replication, and validation on the system. Smart contracts gain importance to exchange money, property, or anything of
value by eliminating the third-party middleman. Various other applications of smart contracts are toward financial derivatives, insurance
premiums, execution of wills, and legal processes.
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Ethereum is widely used to encode smart contracts because of its unlimited processing capability. Solidity is the language to write smart
contracts. In simple words, a smart contract can be regarded as a virtual agreement for a transaction that may or may not involve money, and
without involving any third party.
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Future of Digital Money

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Future of Digital Money

What Digital Money Has in Future for Us?

Will This Surpass Conventional Currencies in Its Value?

What if Current Blocks Are All Mined? What Next?

Will the Value Keep On Rising?

What Are Forks?

n Unintentional soft fork

What Is a Smart Contract?

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