Experts not expect increased use of cryptocurrencies

/By Aynur Karimova - AzerNews/

The expanded use of the Internet all around the world has paved the way for the circulation of virtual currencies. The expansion of e-business in the global economy has led to the creation of a specific demand in cryptocurrency.

Vugar Bayramov, the Chairman of the Center for Economic and Social Development, believes that despite the development of e-government services in Azerbaijan, a strong expansion in cyrptocurrency is not expected either in Azerbaijan or the rest of the world.

The expert told local media that there are three reasons behind a low interest in virtual currency.

"Firstly, this is due to the fact that there is still not a trend of using virtual currency. Secondly, this money is not issued by the central bank of any country or any state, i.e. nobody gives guarantees. And, thirdly, there are still concerns, because there are high risks of counterfeiting of these coins. In addition, it is possible that third parties may seize part of the coin during conducting operations. Therefore, interest of the citizens of many countries, including ours, in cryptocurrency is not so high at the moment," the expert noted.

Bayramov believes that with the development of e-government, interest in these coins will increase, but a strong use of this type of money is not predicted in the world in the near future.

What is virtual currency or cryptocurrency?

Cryptocurrencies are digital currencies. Real digital currencies have been around for some time. One of the first was E-gold, founded in 1996 and backed by gold. Another known digital currency exchange was the Liberty Reserve, founded in 2006; it let users convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them freely with one another at a 1 percent fee.

Bitcoin is not only recognized as the first cryptocurrency, but it is also the basis for every other crypto-coin that has popped up since it was formally introduced in 2009. Satoshi Nakamoto, a pseudonym used by the person or the group of people who created Bitcoin, designed it as a peer-to-peer system that relies on users to keep it working. All transactions are recorded on a public ledger (called block chain), so even though no name or email address is associated with an account, the system is not entirely anonymous.

Mid last year, the first Bitcoin storage in the world was opened in the British capital London, ensuring the safety of the cryptocurrency for its owners.

The storage called Elliptic Vault applies the technology of "deep" storage of Bitcoin on servers stored in a protected place. By applying this technology, virtual currency is encrypted and physically disconnected from the Internet.

The problem of storage of Bitcoin is that in the case of loss or theft, it is impossible to return or restore them. The project is implemented with the support of Lloyds of London – the largest and oldest insurance market in the world.

Bitcoin is a currency that is not regulated by any country or bank supervisory authority in the world.

Another cryptocurrency reserve is called Litecoin, designed for faster transactions. Information about Litecoin appeared in media outlets on April 2, 2013, when the price of this cryptocurrency sharply jumped from $2 to $10 on the Japanese stock exchange MtGox. This cryptocurrency was "invented" by a person who was working on the promotion of Bitcoin.

Litecoin was conceived by its developers as an evolution of Bitcoin and has a number of differences from Bitcoin. As of December 7, 2013, 1 Litecoin cost approximately $20 at the BTC-E stock exchange.

Litecoin can be used to exchange for Bitcoins or conventional money in an exchange, as well as for e-payments of goods and services from sellers who are ready and able to accept them. Cryptographic methods are being used to maintain and protect the system.

Using cryptocurrencies is a bit more complicated than digital payment services like PayPal or Google Wallet. Also, unlike banks and online services, they're decentralized, with no single governing body overseeing and verifying transactions.

Those who want to invest in any kind of cryptocurrency will have to study it closely and prepare for the consequences as their values fluctuate quickly and widely. For example, Bitcoin reached its current all-time high of $1,242 per coin in November 2013, after having been worth $200 a few months prior.