Digital currencies are protected by encryption, but this will not prevent them from being exposed to many risks, especially with the amazing development of artificial intelligence technologies (Getty)
Today, the world is experiencing a rapid technological revolution and a terrible historical transformation, as we are now talking about digital transformation, and the digitization of a group of vital sectors in our daily lives.
Not to mention the great momentum that we are seeing and hearing about digital currencies and NFTs, and our children are talking about these matters and trying to have the tools to understand them and benefit from the capabilities and resources they provide. In contrast to the great ignorance of the people about these matters, there is an unprecedented gap that we now notice between us and the current generation of our children. Should we fight digital illiteracy now? Has the concept of ignorance changed?
Digital expansion and a promising market
With the remarkable development that we see in the world and the digital trend that everyone is talking about, many people have rushed to ride the wave and try to understand the digital market, especially as we hear every time about the fantastic profits and astronomical numbers achieved by some of those working in the field.
Digital currencies are virtual currencies based on blockchain technology. It aims to enable direct peer-to-peer transactions without intermediaries whether a person or an institution.
Bitcoin, Ethereum, BNB, and USDT are prominent examples of digital currencies in terms of market capitalization. Unlike traditional currencies, because they are encrypted and use this encryption to increase the security of online transactions. In addition to buying cryptocurrencies, many people want to trade them to make a profit; Because speculators control the rise and fall of their prices.
It is not issued by a central authority, which protects it from government interference and manipulation. Bitcoin mining reduces rewards for miners, and can affect the profitability of mining it, forcing miners of this digital currency to adapt and become more efficient.
Historical data also indicates that Bitcoin mining can have a significant impact on the price. While a bullish breakout, in general for Bitcoin, may lead to short-term price volatility; As the world's largest cryptocurrency in terms of popularity and market capitalization, this major event could also have an impact on the market of other currencies.
If we consider the path of the value of Bitcoin, we will find that it has reached unprecedented and historical levels, as the value of this currency touched the barrier of 75 thousand US dollars. A report by CoinShares, a well-known European alternative asset management company specializing in digital assets, showed that internal flows of cryptocurrency assets rose to a record level this year with increasing investor interest in these currencies. This rise is due to the approaching month of April, which is the next fairness date for Bitcoin.
Mining occurs every four years, is part of the digital currency mining process, and one of the most important protocols that determine the identity of the most powerful currency in the digital world. This is inherent in Bitcoin's source code, and its goal is to halve the mining block reward per block, controlling inflation and slowing the rate of creation of new Bitcoins, thus maintaining scarcity and simulating the deflation of precious metals like gold.
With the US Securities and Exchange Commission officially allowing Bitcoin to be traded in ETFs at the beginning of this year, eleven investment funds were listed on the stock exchange, opening promising horizons for investing in digital currencies.
Fraud and hacking risks
Digital currencies are protected by encryption, and therefore they are resistant to fraud in principle, but this has not prevented exposure to many risks, and will certainly not prevent them in the future, especially with the amazing development witnessed by artificial intelligence technologies and their various uses.
Regardless of the risks of a major and sudden collapse in the value of cryptocurrencies that people and institutions may face, just as happens with fiat currencies due to multiple intersecting economic, political, social, and geostrategic factors, dealing in digital currencies remains exposed to many risks.
It is represented by piracy operations, as the facts speak of many cases of piracy, some of which amounted to hundreds of millions of dollars. The field also suffers from the risk of fraud by some parties creating untrusted digital platforms that collect investments from individuals and institutions and are then closed.
This sector also faces the possibility of company owners manipulating numbers and giving incorrect numbers about profits to mislead financial institutions and their investors. With the aim of plundering their savings, as happened to the (FTX) platform, the cryptocurrency exchange in the United States that declared bankruptcy in November 2022, and its founder, “Samuel Bankman Fried,” who at the same time owns one of the most important digital currency trading companies, is being tried on charges of fraud, Which had a very negative impact on traders' confidence.
What about a non-fungible token?
NFTs are a form of digital assets; Because it is unique and cannot be replaced by anything else. Although cryptocurrencies like Bitcoin are fungible; Because one currency can be exchanged for another of the same value. However, NFTs are digital assets that each have a different value, and cannot be exchanged for other assets. NFTs are proof of ownership of a digital asset, such as a photo, drawing, tweet, or music video.
Owners of NFTs can monetize ownership or royalties. However, owning NFTs does not necessarily mean that a person has exclusive rights, as anything digital can be copied endlessly.
This is a new form of digital ownership that has revolutionized the world of technology. Many people have been able to make a lot of money from it, and many people interested in the field of finance and business predict that it will be one of the most important areas of financial investment, as many people and companies will turn to investing in it, which will achieve its great spread.
In general, it can be said: The world of currencies and digital assets is no longer just talk in the virtual world when the phenomenon began a few years ago, but rather has become part of the real world that contributes to the movement of the global economy, especially with many companies accepting the principle of payment with digital currencies such as Bitcoin.
Likewise, some countries are moving towards issuing digital currencies, such as the digital US dollar and the digital yuan, which economic decision-making circles are talking about in China. The rope is on the tractor, as long as the two forces that determine the course of the world on the economic level have made their way on this level.
The opinions expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.