Cryptocurrencies and Blockchain: A Promising, and Potentially Scary, Future
Important risks associated with crytocurrencies and blockchain technology as well as with initial coin offerings (ICOs):
- blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits;
- cryptocurrencies and blockchain systems and ICOs could be vulnerable to fraud and cyber security risk;
- investing in cryptocurrencies is highly speculative and an investor can lose the entire amount of their investment;
- if a cryptocurrency or ICOs is deemed to be a security it may be deemed to violate federal securities laws;
- there may be a limited or no secondary market for cryptocurrencies and ICOs; and
- there are risks posed by a lack of regulation in this space.
Glossary of Terms
According to PwC, blockchain is a decentralized ledger of all transactions across a peer-to-peer network. Using this technology, which employs digital tokens that are built on a distributed ledger infrastructure, participants can confirm transactions without the need for a central certifying authority. (Per the World Bank, distributed ledgers use independent computers to record, share and synchronize transactions in their respective electronic ledgers, instead of keeping data centralized as in a traditional ledger.) Potential applications of blockchain include fund transfers, settling trades, voting, and many other uses. Cryptocurrency is a type of digital token, and is designed as a medium of exchange. Other digital tokens provide rights to use assets or services, or in some cases represent ownership interests.
Artificial intelligence (also known as machine intelligence) is intelligence exhibited by machines. It is often defined as when a machine uses cutting-edge techniques to competently perform or mimic "cognitive" functions that we intuitively associate with human minds, such as "learning" and "problem solving.”
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