Bridging the gap between financial systems and computer whizzes, cryptocurrencies are poised to gain ground in today’s markets. These peer-to-peer systems utilize blockchain technology to conduct and verify transactions.
Since the network is decentralized, there is no main authority to judge whether transactions are legitimate or not. The creator of Bitcoin, Satoshi Nakamoto, worked around this by having participants’ computers solve part of a cryptographic puzzle. Helping to solve this verifies the blockchain and grants a specific number — or fractions — of bitcoins.
Although it sounds complicated, in theory, anyone with some type of computer can get into the cryptocurrency market. Initially, cryptocurrencies were slow to catch on. However, a recent study shows just the opposite.
3 Million Users — and Growing
A recent report released by the Cambridge Centre for Alternative Finance shows that cryptocurrencies have a broader acceptance than originally believed. It estimates that more than 3 million people are actively mining, accumulating and storing cryptocurrencies. This puts its research at odds with previous guesstimates, which pegged the number at around 1 million.
To reach this conclusion, the Cambridge Centre for Alternative Finance analyzed data gathered from roughly 75 percent of the cryptocurrency industry — more than 100 companies in 38 countries.
This study is quite a big deal, and highlights the unprecedented growth of cryptocurrencies. Bitcoin was established in 2009 and enjoyed complete market domination for quite a while. Recently though, it’s fallen to 72 percent, thanks to the introduction of other cryptocurrencies.
Even business has jumped on the bandwagon, which is a good thing, as it will be the key to Bitcoin’s long-term survival. As more and more companies accept bitcoin as a form of payment, attitudes surrounding the currency itself will change. People will see it as less of an investment — like stock — and more like what it really is — money.
Increased acceptance in the business market is also a positive sign for nonprofits, as it gives them more precedence to accept bitcoin donations. Although this was still in its early adoption phase back in 2014, many nonprofits are now seeing Bitcoin’s advantages over cash, besides providing an additional revenue stream.
For one thing, the processing fees are much lower than those of credit card transactions. Furthermore, some third-party processors even do conversions for nonprofits at no cost. This also greatly simplifies donations from overseas.
Perhaps most surprising is that there are no tax-reporting obligations, as the IRS classifies bitcoins as property for tax purposes. Thus, in the nonprofit world, bitcoins are noncash gifts, which are not assigned any value.
The Future of Cryptocurrencies
As the number of cryptocurrency users grows, the system must change to accommodate them. One subject that’s due for an overhaul in 2017 in privacy.
Currently, with the right information, it’s quite simple to tie a Bitcoin address to an owner. This opens up a potential avenue for individuals compromising private information.
We may also see the advent of classes focused on cryptocurrencies, such as the ones developed by Ohio University. Colleges may even start to accept bitcoins as tuition payment.
Overall, the future of cryptocurrencies seems bright. With 3 million active users and counting, businesses across the nation may soon support them as payment methods. Nonprofits will have more flexibility with donations, and students will have more options to pay for college. As for the future of the U.S. dollar, only time will tell.
This is a guest post by Kayla Matthews. The views expressed are her own and do not necessarily reflect those of Bitcoin Magazine.
Kayla Matthews is a technology journalist and writer at Writerzone. When she isn’t writing about Bitcoin, she’s writing about the latest apps and AI for VentureBeat and MakeUseOf.