A cryptocurrency is a digital currency that is produced and controlled using sophisticated encryption methods, sometimes referred to as cryptography. With the creation of Bitcoin in 2009, cryptocurrency made the transition from an intellectual concept to a (virtual) reality. Even though its fan base grew over the next few years, Bitcoin came to the attention of investors and the press in April 2013, when it reached a record $266 per bitcoin after increasing tenfold over the previous two months. At its height, the market value of Bitcoin was over $2 billion, but a 50% decline soon after led to a heated discussion over the future of cryptocurrencies in general and Bitcoin in particular. Will these alternative currencies eventually replace fiat money and grow to be just as commonplace as dollars and euros? Or are cryptocurrencies just a fleeting trend that will soon fade away? Bitcoin has the key to the solution. Blockchain technology is essential to the usability and attractiveness of Bitcoin and other cryptocurrencies.

A blockchain is just a collection of linked informational blocks on an online ledger, as the name suggests. A significant shift in cryptocurrency is expected, according to some economists, when institutional money joins the market. Furthermore, there's a chance that cryptocurrency will list on the Nasdaq, which would lend blockchain technology and its applications as a substitute for fiat money even more legitimacy. According to some, cryptocurrency only requires a legitimate exchange-traded fund (ETF). Although investing in Bitcoin would undoubtedly be made simpler with an ETF, demand for cryptocurrency investments must still exist and may not be created by a fund alone. Peer-to-peer technology, which is used by Bitcoin, allows the network to do all tasks collectively, including currency issuance, transaction processing, and verification. Although this decentralization frees Bitcoin from government control or intervention, the drawback is that there is no central body to guarantee smooth operations or support the value of a Bitcoin. Through a process known as "mining," which demands powerful computers to solve intricate algorithms and crunch data, bitcoins are created digitally. They are presently being created at a pace of twenty-five Bitcoins per ten minutes, with a cap of twenty-one million, which should be achieved in 2140. These features set Bitcoin apart from fiat money, which is supported entirely by the confidence and credit of a nation's government. Issuing fiat currency is a highly centralized process that is overseen by the central bank of a country. Although the bank controls the quantity of currency it issues in line with its goals for monetary policy, there isn't a cap on how much of it can be released. Additionally, a government agency typically insures local currency deposits against bank failures. In contrast, Bitcoin lacks any kind of support system.

The price that investors are prepared to pay for a Bitcoin at any given moment determines its value in its entirety. Additionally, customers with Bitcoin balances have nowhere to turn if a Bitcoin exchange fails. There is a lot of discussion about the prospects for Bitcoin. Although there are many "crypto-evangelists" in the financial media, Kenneth Rogoff, a professor of economics and public policy at Harvard University, claims that the "overwhelming sentiment" among supporters of cryptocurrencies is that their total "market capitalization could explode over the next five years, rising to $5-10 [trillion]." Due to its decentralized nature and transaction secrecy, Bitcoin is also a preferred medium of exchange for a variety of illicit operations, including the sale of drugs, smuggling, money laundering, and the purchase of firearms. Strong regulatory and other governmental organizations, including the Department of Homeland Security (DHS), the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), and the FBI, have taken notice of this. FinCEN published regulations in March 2013 that classified virtual currency exchanges and administrators as money service organizations, placing them under the purview of national legislation.

The largest Bitcoin exchange, Mt. Gox, had its Wells Fargo account frozen by the DHS in May of that year on the grounds that it had violated anti-money laundering regulations. Additionally, in August, the Department of Financial Services in New York sent subpoenas to 22 up-and-coming payment companies, many of which dealt with Bitcoin, requesting information regarding their anti-money laundering and consumer protection policies. By both market value and volume, the New York Stock Exchange (NYSE) is the Biggest Stock Market in the world by volume. Technology advancements may eventually enable cryptocurrencies to overcome some of their current drawbacks, such as the possibility of a hacker stealing a virtual vault or a computer crash wiping out a user's digital wealth. The fundamental conundrum facing cryptocurrencies will be more difficult to resolve: as they gain popularity, more regulation and more attention are likely to be directed towards them, undermining the core idea behind their existence.

Even though the percentage of retailers accepting cryptocurrency has been rising, they remain a relatively small minority. For cryptocurrencies to be used more extensively, customers must first accept them widely. Except those who are technologically savvy, most people will probably be deterred by their relative complexity when compared to traditional currencies.