Cryptocurrency and your business – An Entrepreneur’s Guide
The aim of this article is to present information in a simple form on cryptography, a few cryptocurrencies, and their usefulness to entrepreneurs as well as precautionary information for one who decides to dabble into using this new craze.
An entrepreneur is a term that captures one who owns, operates and finances a business i.e A person who sets up a business or businesses, takes on the financial risks with expectation of profit is an entrepreneur. Asides the fact that cryptocurrency can be a medium of exchange for an entrepreneur’s business said entrepreneur can double as an investor in digital assets that turns to money and wealth at large. If you fall in this category of ‘entrepreneur’ or potential investor, you’ll find the following information useful.
Going from the word Crypto- a person who adheres or belongs secretly to a party, sect, or other groups; cryptography is the practice and study of techniques for secure communication in the presence of third parties called adversaries. More generally, cryptography is about constructing and analyzing protocols that prevent third parties or the public from reading private messages; various aspects in information security such as data confidentiality, data integrity, authentication, and non-repudiation are central to modern cryptography.
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. They have the potential to create huge returns on your investment. For instance, statistics show that $1,000 invested in Bitcoin in 2013 would be worth over $400,000 today. Recent news has it that cryptocurrency can yield higher results in a shorter time.
The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain that serves as a public financial transaction database.
The first known cryptocurrency as at the time of blockchain innovation is Bitcoin. The currencies fashioned after bitcoin are collectively called altcoins. Some of these currencies are easier to mine than bitcoin is but there are tradeoffs, including greater risk brought on by lesser liquidity, acceptance and value retention.
More than 1,600 cryptocurrencies have come into existence since Bitcoin. Many of those tokens and coins are more popular among the community of bankers and investors. The field of cryptocurrencies is always expanding.
Some of the prominent cryptocurrencies asides Bitcoin:
Litecoin is based on an open source global payment network that is not controlled by any central authority and uses “scrypt” as a proof of work, which can be decoded with the help of CPUs of consumer grade. It was launched in 2011 and is among the initial cryptocurrencies following bitcoin.” it has a faster block generation rate offering a faster transaction confirmation. There are a growing number of merchants who accept Litecoin.
Ethereum is a decentralized software platform that enables Smart Contracts and Distributed Applications (DApps) to be built and run without any downtime, fraud, control or interference from a third party. It was launched in 2015. The applications on ethereum are run on its platform-specific cryptographic token, ether. Ether is like a vehicle for moving around on the ethereum platform and is sought by mostly developers looking to develop and run applications inside ethereum and now by investors looking to make purchases of other digital currencies using ether. Ethereum was later split into Ethereum (ETH) and Ethereum Classic (ETC).
Zcash, a decentralized and open-source cryptocurrency launched in the latter part of 2016 “If bitcoin is like http for money, zcash is https,” is one analogy zcash uses to define itself. Zcash offers privacy and selective transparency of transactions. Thus, like https, zcash claims to provide extra security or privacy where all transactions are recorded and published on a blockchain, but details such as the sender, recipient, and amount remain private. Zcash offers its users the choice of “shielded” transactions, which allow for content to be encrypted using an advanced cryptographic technique or zero-knowledge proof construction
Ripple is a real-time global settlement network that offers instant, certain and low-cost international payments. Launched in 2012, ripple “enables banks to settle cross-border payments in real time, with end-to-end transparency, and at lower costs.” Ripple’s consensus ledger (its method of confirmation) is unique in that it doesn’t require mining. In this way, ripple sets itself apart from Bitcoin and many other altcoins. So far, ripple has seen success with this model; it remains one of the most enticing digital currencies among traditional financial institutions looking for ways to revolutionize cross-border payments.
Bitcoin continually leads the cryptocurrency pack, in terms of market capitalization, user base and popularity. But for enterprise solutions, virtual currencies such as ethereum and ripple, which are being used more, are becoming popular, while some altcoins are being endorsed for superior or advanced features vis-à-vis bitcoins. According to the trend cryptocurrencies are here for long and competition is growing steadily but time will tell those that will remain.
- Wealth management is one of the most exciting ways cryptocurrency can be used. Imagine being able to manage a portfolio of crypto assets without being a financial expert, that imagination is brought to life by tokes/digital currencies.
- Business ethics will thrive in display and actions where measures are in place to make it happen. Blockchain (the technology through which cryptocurrencies work through), makes it possible to track every transaction with complete transparency. Cryptocurrency can, therefore, be used to encourage ethical business practices.
- In order to avoid corruption in NGOs like a charity organization, cryptocurrency can be used because of its ability to keep companies accountable; blockchain will drive out many problems such as fund leaks. Presently the World Food Programme (WFP) is using blockchain to securely distribute cash assistance to the hungry.
- For business people that have to travel, it is good news that Bitcoin is being accepted by more retailers. Travel transactions can be made using cryptocurrency. From flight purchases to hotel bookings, car rentals, cruises, etc.
- Funds are like fuel to a machine in business, we need funds to get the business going. Cryptocurrencies are being looked to as opposed the traditional VC funding or fund-raising websites for funding since it’s easy to track and obtain money this way, it’s revolutionizing the entire fund-raising process.
- Cryptos also increase liquidity. You can find buyers of your digital asset almost instantaneously.
There are plenty of ways that cryptocurrency affects us and brings benefits within reach. As they gain popularity in the business world more uses will be found.
By default, being an entrepreneur has risks and transacting with cryptocurrency is a risk as well. However, what makes a business successful is not the absence of risks or shortcomings but the management strategies, understanding of the business as well as other influxes. Whether you have a significant amount of capital or a little bit of extra cash, cryptocurrency is an investment worth looking into. But a dire comprehension of the cryptocurrency risks is necessary to bypass challenges and reap profits.
The real value of any cryptocurrency relies on building a strong product that a significant network of users will want to use. However, if these networks either fail to attract users or never get users to actually utilize the platform, then the currency will likely see a drop-off in price. Many of the recent ICOs that failed to perform after launching did so due to a lack of network engagement.
Startups can run out of resources and be unable to continue operations. In the same vein, if a cryptocurrency ICO does not raise enough money or the startup spends more money than expected, the doors close and the network really takes off. Many cryptocurrencies are doing pre-ICO raising in order to have firm commitments of resources and demonstrated demand for the currency.
Ultimately, every cryptocurrency is a startup and has a team of founders running it. In order for the cryptocurrency to effectively navigate from ICO phase to mass-market levels, it needs a solid founding team. Before choosing to invest in a cryptocurrency ICO, make sure to look into the team’s background and evaluate whether they have the skill sets and capabilities to execute the project.
When compared to investing in the stock market or even real estate, cryptocurrency ICOs are much more volatile. Issues such as hacking incidents can cause investors to lose all of their investment quickly. Granted, such drastic incidents are rare, but major drops in ICO value are not unheard of.
In the end, new investments possibilities are bound, but we handpick the ones to explore. It is critical to keep up to date on options available, understand them and as an entrepreneur, make the choices that result in the end goal of ‘making a profit’. Information contained herein is compiled and written for suggestive purposes and subject to questions/opposition.
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