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Cryptocurrency: financial panacea, or doomed to fail?

It is virtually impossible to sit down today and have a discussion with people and not broach the subject of cryptocurrency, writes Road Scholars Training's Daniele Lima.

Questions such as: should we buy it, how much should be bought, what types of coins should be bought, from which exchange should you buy them, what security measures should be undertaken and so on. Certainly, they are all valid questions and with the continued escalation of bitcoin and other alternative coins throughout 2017, cryptocurrencies have now most definitely achieved a global phenomenon status.

Despite this high level of broad awareness about the existence of bitcoin and digital currencies, there remains a surprising level of misinformation around these issues. Currently, there also appears to be an information war being waged between the groups that are pro-cryptocurrencies and those that oppose it.

This ongoing battle has provided an enormous level of noise through the saturation of information being provided by both sides that has tended to confuse, overwhelm and in many cases, scare off potential investors. However, before any logical decision can be made, an understanding of the key underlying principles is a necessary first step.

What are cryptocurrencies?

Fundamentally, it is a digital medium of exchange that is stored electronically in the blockchain and requires an encryption system to both create coins and validate exchanges that take place within the network.

Crypto-currencies first came out in late 2008 when Satoshi Nakamoto, the fictional name for the unknown inventor of Bitcoin, developed “a peer-to-peer, electronic cash system. “ In so doing he pioneered the first digital currency that was decentralised, requiring no third party to facilitate the payment.

How do cryptocurrencies work

For cryptocurrencies to operate effectively, the system requires an environment with accounts, balances and transactions that are totally transparent and visible to all. With this form of decentralised system, there is no central server that records all transactions, but rather each participant in the network has access to all transactions being made in order to assess that transactions are valid and that no attempts to double spend have been made.

Blockchain provides a database that records all transactions with strict protocols ensuring that these entries can only be altered when very selective conditions are met, thereby ensuring the integrity of the data. So, in this way it is like a standard fiat currency where transactions are recorded (albeit) on a centralised database.

How do I buy cryptocurrencies?

Cryptocurrencies can be purchased on any number of reputable exchanges such as: Coinspot, Binance and Bittrex to mention three. These exchanges and many others have excellent features available and allow simple buying and selling processes that allow any interested party to begin their journey into these digital currencies.

Understanding that bitcoin continues to be the dominant player in the market at present, investors and users should however continue to study the other less known cryptocurrency options which in some cases present equally strong potential for growth. Below are some of the most popular of the current cryptocurrency options.

Key cryptocurrencies


Bitcoin certainly needs no introduction. It is the pioneer and remains to this day the standard in the market that still has the power to pull the market up and down with its own fluctuations in price. Widely accepted as a means of payment in many countries. From its initial release with a zero value it recently achieved a peak value of US$19,343 on 16 December 2017.


Ethereum has quickly risen to second place behind bitcoin since its release in 2017. It is widely known for a blockchain that not only can validate a set of transactions but can also process detailed contracts and programs.

This added functionality means ethereum is an ideal tool for blockchain practical applications.

Following the hack of the DAO, which was an ethereum smart contract, the developers came out with Ethereum Classic. Additionally, there are other ethereum offshoots, where even ethereum hosts various coins including augur and digixDao, making it more of a hybrid digital currency.


Ripple remains controversial and disliked option as it is widely adopted by banks as part of a centralised network that serves as a medium to neither store and exchange value, but merely as a coin that aims to protect the network from spam.


Perhaps the least understood aspect of investing in cryptocurrencies and one that holds the largest potential for financial gains is that presented by master nodes and here’s how they work. Understandably every cybercurrency network wants to encourage its peers to hold the coins long term to provide the network with a greater level of stability. What they do is offer daily rewards for doing this. An example of this is the ALQO cryptocurrency that supports masternodes. In this example the user buys 10,000 coins currently valued at US$2.21 for US$22,100.

To incentivise the buyer to hold the coins, each day apart from the expected increase in coin value per se, the network rewards the buyer with 37.5 complimentary coins per day, every day as a passive income on top any increases in the coins value. To achieve this, you would simply buy the required number of coins via trading and set up the master node on their website, while buying a 12-month hosting. Although with master nodes, you can pull the plug and retrieve the funds at any time if you so choose.

Payouts as reward for running the masternode should arrive roughly every 24 hours at a credit of 37.5 ALQO. Over time this reward will decrease as ALQO scales and more masternodes come online. The first reward will usually come after about two to three days and if the hosting for the masternode goes offline and/or restarts then this waiting period starts again.

Looking into the crystal ball for 2018 and beyond

There is little if any real doubt that cryptocurrencies as a group are here to stay. The technology that underpins their use is real and their advantages over traditional currencies, well documented.
Equally certain is the fact that many of the coins that come out almost daily, will do little and die. While the more valuable coins with greater utility and functionality, will consolidate, grow and become part of the financial landscape in 2018 and beyond.

Ultimately cryptocurrencies will change the currency landscape and the status quo that financial institutions are understandably so keen to keep. Perhaps Harold Abraham said best in the film classic Chariots of Fire when he said, “the corridors of power are guarded jealously.”

The battle I spoke of earlier between the pro faction and the negative faction who daily attempt to fill the media with doom and gloom stories of the inevitable fall of cryptocurrencies, are doing little other than temporarily slowing the cyber express, as people globally continue to invest in bitcoin, ethereum and in master nodes.

As a final step as governments and banks accept the inevitable, they begin to understand the question is how they best approach it moving forward to ensure that they are part of the natural evolution to digitally-based, cryptocurrencies.

Daniele Lima is the managing director at Road Scholars Training business coaching and strategic consultancy.

Cryptocurrency: financial panacea, or doomed to fail?
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