The price of major altcoins such as bitcoin and ethereum dropped significantly following an announcement from South Korea. The Korean Justice Minister announced that a bill is being prepared in the country’s legislature to ban the trading of cryptocurrency. A significant amount of ethereum, around 10 per cent according to live trading site CryptoCompare, is traded against South Korean currency. Five per cent of bitcoin is also traded against the South Korean won.
Also troubling to investors were comments Warren Buffett, CEO of Berkshire Hathaway, made to CNBC about his dislike of Bitcoin and other blockchain-based assets.
“In terms of cryptocurrencies, generally, I can say almost with certainty that they will come to a bad ending,“ Buffett, nicknamed the Sage of Omaha, stated to CNBC.
Other major developments in altcoin included the partnership of Ripple, one of the largest cryptocurrency companies, with Texas-based transfer firm MoneyGram. MoneyGram will use XRP, Ripple’s cryptocurrency, to reduce transfer costs through Ripple’s payment service xRapid. In response, Ripple stock surged by almost 15 per cent last Thursday morning.
Ripple has dropped and risen dramatically in recent weeks, including a surge of nearly 60 per cent at the end of last year. The currency hit a market capitalization of $86.3 billion at the end of December, surpassing ethereum as the second-largest cryptocurrency. Bitcoin still remains the world leader, with a market cap of $232-billion as of last Thursday, according to CoinMarketCap.
Many investors and pundits have criticized Ripple as opposed to other cryptocurrencies such as bitcoin and ethereum. Analysts have determined that unlike bitcoin, Ripple is not truly decentralized.
Bitcoin relies on a technique of “mining”, a process where ‘miners’ keep the blockchain secure and consistent by collecting pending transactions into a block. If a certain amount of miners verify the block and give approval, the block is added to the blockchain, which is Bitcoin’s ledger that holds all of the transaction history for the cryptocurrency. This process keeps the digital currency from being dependent on a central system, and since miners are rewarded with bitcoins for their work, they are incentivized to continue verifying transactions.
In contrast, Ripple has no ‘mining’ process for XRP. When Ripple launched, all coins were created immediately, and Ripple has been distributing the coins to computers who are given permission to participate. Bitcoin allows any computer to join into the network. Many have commented that this makes Ripple’s structure much more centralized than bitcoin or ethereum, and therefore a poorer form of digital currency.
However, even though Bitcoin is the largest cryptocurrency in terms of market cap, and the world’s first digital currency without a central bank or administrator, it is not without its detractors. Miners need incredibly powerful computer systems to solve the complex math equations necessary to verify a block. The equations are also continually growing more advanced, requiring more advanced hardware and software to keep pace. This process requires an enormous amount of electricity, which has drawn criticism for its lack of environmental sustainability.
Also making headlines in the altcoin world is news the Venezuelan federal government will begin issuing cryptocurrency. The currency, dubbed the ‘petro’, will be back by the country’s commodities, most notably oil and gas. Venezuela plans to issue a total of 100 million petros, with each petro back by one battel of oil from the country’s supply. Many commentators have stated that the proposed ‘petro’ is not a cryptocurrency at all, but rather a “digital, oil-backed security”, according to Forbes magazine.