Crypto Whaaat?

By April Tosch-Jamjoom

Welcome to the latest buzzword: Cryptocurrenc.

Bitcoin, Ethereum, Litecoin and Ripple, to name a few other buzzwords. The past couple of months have been very exciting for crypto enthusiasts. Many who invested last year saw monumental gains only to be disappointed by high losses beginning in 2018. As is the tale of nascent markets, volatility will remain high until the market stabilizes.

Will it stabilize? Yes.

So what are cryptocurrencies?

Simply stated, they are units of value that are a natural progression of currency. Cryptocurrencies are virtual, are not backed by any commodities or governments, and operate via an underlying framework known as Blockchain. Consider Blockchain the tracks, and cryptocurrency the train.

Blockchain is a decentralized, peer-to-peer validation system that allows units of value to be sent and received without the necessity of a median. The transactions are recorded in ledgers that are maintained in perpetuity within the network.

Saudi Arabia has joined the ranks of Blockchain early adopters. In February, the Saudi Arabian Monetary Authority (SAMA) entered in a pilot program with Ripple, a US fintech company, to use Ripple’s Xcurrent proprietary software to facilitate settling cross-border payments instantly. It is estimated that the adoption of Xcurrent will reduce remittance costs by up to US$400m per year.

Ripple has its own cryptocurrency coin XRP, which is ranked 4th among the strongest cryptocurrencies being actively traded.

Cryptocurrency trading is still in its early adoption phase. As its lifecycle progresses and more people enter the trading sphere, markets will grow further and stabilize. Saudi Arabia and other governments have been eyeing crypto trading with skepticism. Many countries have attempted all-out trading bans only to later retract restrictions and instead create legislation pertaining to Initial Coin Offerings (ICOs). However, the cat has already been let out of the virtual trading bag with the myriad of global cryptocurrency exchanges that allow for crypto trading to be conducted online, across borders.  Regulating authorities have very little muscle in imposing trading restrictions and have no option other than to grudgingly capitulate, which they are doing.

Proceed with Caution

Saudi Arabia has warned against individuals investing in ICOs, to protect its public from engaging in risky investments that could lead to significant losses. Do Your Own Research (DYOR) holds true in any speculative endeavor, including this one. However, the Kingdom has stopped short of enacting any cryptocurrency trading bans and has recently hinted at creating a new cryptocurrency in partnership with the UAE. In addition, Nicholas Maduro, President of Venezuela, recently proposed a new oil-backed cryptocurrency and floated the idea to all OPEC members. This infers that not only is the Gulf region allowing cryptocurrency trading, it is also joining the ecosystem and actively participating in its growth.

This is the first of a three-part series explaining cryptocurrencies. Financial advice is not given. Those interested in participating in cryptocurrency exchanges are highly encouraged to DYOR.

You Might Also Like