Going beyond the problems of bitcoin

Bitcoin has dominated headlines in the financial world in recent months with a return of over 1,700% so far this year. Rising prices are attracting more investors, though some experts see the increasing level of interest as a sign of a bubble. But this is not the only problem.

Bitcoin is an unregulated cryptocurrency which is administered by a network of users through an open and distributed ledger known as blockchain. Each transaction is verified by the network. Since it is a distributed ledger and no one person or organization controls it, technically, chances of someone manipulating the system are very low. There are multiple reasons why people around the world are getting attracted to bitcoin or other such virtual currencies. Some people like the idea that it is actually possible to make electronic transactions without involving the formal system of banks and financial institutions. The possibility that demand for such an instrument will increase over time is pushing prices. In different parts of the world, some people also wish to take their savings out of domestic currency owing to economic and political instability. However, a large number of investors are buying just to ride the momentum and make quick returns. Rising prices of unregulated cryptocurrencies could pose a number of problems for the formal financial system.