When investors think of unstoppable trends, marijuana stocks might rightly come to mind. But in terms of percentage returns, nothing has even come close to cryptocurrency ethereum, which has risen by right around 2,270% for the year, as of July 17, 2017. By comparison, it's taken the S&P 500 roughly 35 years to log a return of about 2,000%.

Ethereum's massive gains, and that of its bigger rival bitcoin, are primarily the result of a weaker dollar and growing media and investor interest in cryptocurrencies.

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For instance, earlier this year, we witnessed Japan make bitcoin a legal form of tender, as long as it complies with the country's anti-money laundering regulations. This nod of confidence comes with a growing list of retailers and service providers, such as Overstock.comand Microsoft, that in some way accept bitcoin as payment.Even select marijuana dispensaries have turned to cryptocurrencies as a bridge between consumers with debit and credit cards and financial institutions that want nothing to do with the cannabis industry.

Weakness in the U.S. dollar, which recently hit a 10-month low, has also fueled buying in digital currencies. Though a weaker domestic currency helps drum up interest in exports, domestic investors typically dislike dollar declines. A devaluation in the dollar usually means investors will seek out a better store of value, which traditionally has been gold. Gold is a finite resource, and thus its scarcity provides the perception of safety and value to investors. However, mined cryptocurrencies like bitcoin also have a finite limit (21 million coins in bitcoin's case), offering the perception of scarcity and value.

The fact that these currencies aren't backed by the government, and that the public still doesn't understand them very well, has also arguably fueled interest and momentum.

But as the old proverb goes, "What goes up must come down."

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Following what was a better-than-5,000% run higher in a matter of months at one point, ethereum has seen its value crash in recent weeks. Since touching an all-time high of $407.10 back on June 12, ethereum has given back more than half of its value.As of 7:15 p.m. EDT on July 17, it was going for less than $189 per coin, and it had dipped as low as $130.26 during this past weekend. From peak to trough, we're talking about a 68% loss in value in less than five weeks, or more than $20 billion in market cap erased.

What on earth is going on, you ask? Some of this recent drop could be nothing more than simple profit-taking. Keep in mind that we're talking about an asset that appreciated by around 5,000% at one point this year. Considering how few businesses accept ethereum as payment, investors would have been foolish not to lock in some of their gains. But profit-taking is far from the only reason ethereum has been taken to the woodshed over the past month.

Another issue concerns the uncertain future of bitcoin. On Aug. 1, bitcoin is set to undergo a software update. The issue at hand is that those who are responsible for the upkeep of bitcoin behind the scenes have split into two factions, and are thus planning to adopt two separate and competing software updates. According to Bloomberg, these factions are debating whether bitcoin should evolve as a currency to serve more mainstream applications or remain as a libertarian test to monetary theory.

Though the incentive to reach a consensus and calm investors is obviously high, there remains a very real risk that bitcoin could subsequently split into two separate cryptocurrencies if a consensus is not reached. This instability has carried over to ethereum, which is regarded by some pundits to have a better underlying technology and broader use than bitcoin.

Finally, as CNBC pointed out, start-ups could be behind the recent plunge in ethereum. Sky-high returns have allowed start-ups the opportunity to cash in their ethereum coins for an equivalent amount of U.S. dollars, thus increasing selling pressure on the cryptocurrency.

Image source: Getty Images.

Perhaps the biggest issue yet to be decided with cryptocurrencies like ethereum and bitcoin is whether decentralization is a friend or foe.

In one sense, decentralization is a great thing. Having numerous miners across the globe effectively keeps these cryptocurrencies from succumbing to the will of cyberattacks. If there was a central network behind bitcoin, as an example, it could become an easy target for criminals.

Then again, a lack of centralization on cryptocurrency trading exchanges is arguably bad news. Competing exchanges and a lack of trade centralization are what drive volatility and reduce the uptake of these currencies by businesses.

In short, there's a lot left to be hashed out in the coming weeks for bitcoin and cryptocurrencies in general. While they represent an alluring alternative for consumers who dislike the traditional monetary system, use options are still pretty limited, and translating cryptocurrencies into U.S. dollars often has a lag time that can result in losses for investors and businesses. There are numerous issues that need to be tackled before ethereum, bitcoin, or any cryptocurrency for that matter, really has a shot at thriving over the long run. For the time being, I suggest sticking with a tried-and-true wealth creator like the stock market and keeping cryptocurrencies like ethereum out of your investment portfolio.

Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Don't Look Now, but Cryptocurrency Ethereum Is Crashing ...

Bitcoin has risen as much as 28% over the past 24 hours, driven by news that an imminent split in the cryptocurrency has been narrowly averted. The price of bitcoin nearly hit $3,000 late on July 20, within spitting distance of its all-time high, set last month.

The remarkable rally took place as bitcoins miners coalesced around one of several competing proposals that would increase the number of transactions that can be processed on the network. The issue has gained urgency in recent months, because one of the measures, known as Bitcoin Improvement Proposal 148 (BIP 148), would lead to a split in the cryptocurrency on Aug. 1 if implemented.

The price rallied as bitcoins miners began broadcasting their support for a less radical proposal, BIP 91, in increasing numbers yesterday. This proposal avoids the so-called hard fork by stopping short of altering the hard-coded limit on transaction capacities that is the bone of contention within the bitcoin world, while offering slightly enlarged transaction capacity.

The threshold for activating BIP 91 is 80% of all the processing power on the bitcoin network. That was achieved in the early hours of July 21. Currently 97% of the processing power on the network, which is largely controlled by miners, is voting in favor of BIP 91.

But its not settled yet. Although enough miners have signaled support for their preferred proposala process akin to broadcasting a preference over the networkenough of them must now run the software that implements this proposal within the next two and a half days. Failure to maintain a simple majority of the processing power, also called the hash rate, would mean BIP 91 does not activate. This would put the bitcoin world back at square one, with just a week to go before the potentially destabilizing hard fork on Aug. 1.

There are also still signs that the fundamental disagreement that led to this showdowna civil war, as some call itis far from resolved. The fight is between bitcoins miners and the influential programmers who contribute to bitcoins open-source code, known as the core developers. The core devs say bitcoin is at risk of being controlled by a cartel of miners who, by virtue of their huge investments in processing power, are able to dictate what changes are made to the codeanathema to bitcoins decentralized founding ethos. But the miners, and other heavy users, like payment processors, point out that the bitcoin network could be abandoned if it doesnt enlarge its limited capacity soon.

The architect of BIP 91, James Hilliard, a miner himself, told industry publication CoinDesk: This is where mining centralization makes things easier, because I can just message everybody on WeChat and help them if needed. That may be so, but it wont comfort the parts of the bitcoin world concerned with centralization of the cryptocurrency, even if the current fix to bitcoins problems goes according to plan.

Read next: Bitcoins civil war threatens to blow up the cryptocurrency itself

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Bitcoin is booming because a split in the cryptocurrency has been narrowly averted - Quartz

Investopedia

New Virtual Reality Cryptocurrency Gets $2.1 in Funding Investopedia As the cryptocurrency world expands, it's difficult to say exactly how many other industries it will impact. Nonetheless, one industry that has already been affected by the expanding digital currency realm is gaming. As mining operations have ...

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New Virtual Reality Cryptocurrency Gets $2.1 in Funding - Investopedia

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In the coming months a startup based in Waterloo, Ontario, is set to kick off a grand monetary experiment, one that will put to the test a new model for business that could prove to be either the webs next great economic engine, or a multibillion-dollar bubble thats as combustible as the Hindenburg.

The concept at stake is cryptocurrency , a form of digital money that exists independent of traditional banks or governments. Over the past few months, the market for cryptocurrencies has rocketed to more than $100 billion (and fallen back to $60 billion) amid extreme enthusiasm and volatility. So-called token sales, or initial coin offerings , also known as ICOs , have raised hundreds of millions of dollars, creating substantial fortunes out of little more than ones, zeros, and pitches. The movements critics compare it to the tulip-bulb manias of centuries past and say it will end the same way.

Advocates, however, believe cryptocurrencies could represent an important way for tech companies to raise cash. Instead of users trading their time, attention, and energy for free services, while a few supermassive landlord corporations reap all the profits (hello, Facebook ( fb ) ), cryptocurrencies could enable participants to be remunerated for their contributions on the platforms, with yet-to-be-invented moneys. Imagine users getting paid by the like.

So far, while their nominal value has soared, cryptocurrencies have mostly been a vehicle for speculators . But in the coming months, for the first time, a mainstream company with an established user base will try its hand at launching a crypto token to its 15 million monthly active users, potentially multiplying by a factor of five overnight the number of people using digital currency, according to estimates by the Cambridge Center for Alternative Finance . The company is Kik, the maker of a chat app favored by American teens , which intends to mint tokens enabling users to transact through its network.

Kik will join more than a hundred early-stage projectswith names like Brave , Civic, and Tezosin hosting token sales in order to fund themselves . But Kik hopes to be among the first to get people to use the tokens for something other than trading, flipping, or speculating.

Ted Livingston, founder and CEO of Kik, had the idea for a cryptocurrency in the back of his mind in 2014 when he launched Kik Points, a video-game-like in-app virtual money. The company shuttered the pilot program last year, but Livingston was pleased with it: The points traded hands an average of 300,000 times per day, more than three times the average number of transactions per month on Bitcoins network during that time. Kiks customers mostly used the points to buy stickers and smileys, but the company intends its new Kin tokens, the batch of to-be-released computer coins, to enable users to do everything from tipping peers, to ordering pizza, to paying for premium content.

Kik plans to mint a total of 10 trillion Kin tokens, selling a trillion to the public, holding on to 3 trillion for itself, and setting aside 6 trillion for a nonprofit that will manage a rewards program for loyal users. Its a new way to compete, its a new way to monetize, and its potentially a new way to exit as well, Livingston says.

If past ICOs are any indication, Kiks will bring in a substantial sum no matter what. What industry watchers will be eyeing, however, is whether Kin will actually catch on, fueling a mini-economy within and outside the app. If it works, the experiment could signal to the world the viability of the much-hyped and, until now, mostly theoretical token-based business model.

Success will pave the way for other traditional companies to do it, says Jake Brukhman, cofounder of CoinFund, which advises companies, including Kik, on blockchain tech. Indeed, crypto enthusiasts have proposed companies such as Twitter ( twtr ) , Snap ( snap ) , and Reddit as leading candidates for eventual token sales.

Either that, or the movementwhich depends on widespread adoption to justify multibillion-dollar valuationscould implode and leave many aspiring entrepreneurs and investors in the dust. For the Internets next big thing, that would be a little more than Kin, and less than kind.

A version of this article appears in the Aug. 1, 2017 issue of Fortune.

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Cryptocurrency Gets Its Biggest Test Yet - Fortune

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How Do You Get Rich Off of a New Cryptocurrency? | Investopedia Investopedia How does one make money off of the hottest new financial trend? and more »

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Investopedia

Latest Cryptocurrency Hub: Kazakhstan? Investopedia The Kazakhstan government announced this week that its AIFC will partner with the external financial organizations to make for an accommodating regulatory climate to encourage cryptocurrency, blockchain, and fintech companies to settle in the area.

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Latest Cryptocurrency Hub: Kazakhstan? - Investopedia

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Best Apps to Track Cryptocurrency Prices on a Mac Investopedia Bitcoin Ticker is a simple app that provides a service exactly as you would expect based on its name: it serves as a ticker for Bitcoin, with information about a number of different exchanges available at once. The app has not been updated since 2014 ... Step-By-Step Guide To Investing in Cryptocurrency In Bitcoin Pioneer Amit Bhardwaj's New e-BookNDTV Top 6 Bitcoin and Cryptocurrency Books to Check out This Summer ...The Merkle What is Bitcoin, what is its price in pound sterling and how does it work?The Sun TechNode (blog) all 17 news articles »

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One of the most popular cryptocurrencies in the world is drawing increased attention from hackers, or at least that has been the case this week. For the second time in a span of just three days, hackers have been able to make off with millions of dollars worth of Ethereum, leaving vigilante white hat hackers scrambling to prevent further theft.

In this latest robbery, the hacking group (or individual hacker, we don't know yet) exploited a vulnerability in Parity, a digital wallet service where cryptocurrency miners can store their Ethereum. In doing so, the hackers were able to swipe over 153,000 Ether worth approximately $34 million from three separate multi-signature Ethereum wallets, according to the most recent estimates.

Following the latest heist, Parity founder Gavin Wood issued a critical security notice to users.

"A vulnerability in Parity Wallet's variant of the standard multi-sig contract has been found," Wood wrote. He goes on to advise users to "immediately move assets contained in the multi-sig wallet to a secure address."

In the meantime, white hat hackers have been able to siphon some 377,015 Ether worth more than $85 million to prevent further loss.

"White hat group(s) were made aware of a vulnerability in a specific version of a commonly used multi-sig contract. This vulnerability was trivial to execute, so they took the necessary action to drain every vulnerable multi-sig they could find as quickly as possible," the White Hat Group stated on Reddit.

Those funds will be issued back to their owners after the group is able to create another multi-sig for each individual with the same settings as before, minus the vulnerability that made theft possible in the first place.

This is not the only black eye for cryptocurrencies, or even the only theft this week. Back on Monday, hackers made off with an estimated $10.3 million in Ethereum currency from CoinDash. In that instance, it is believed the culprits simply replaced the legitimate Ethereum wallet address listed on CoinDesk with one that belonged to them.

There are several other examples of thieves stealing large amounts of cryptocurrencies, as Gizmodo points out. Back in June of last year, hackers stole $53 million cryptocurrency from venture capital fund Decentralized Autonomous Organization. And then there was the situation in which $450 million of Bitcoin vanished from trading hub Mt. Gox a few years ago.

Despite the risks, mining for cryptocurrency continues be popular, much to the detriment of PC gaming. If and when things ever settle down, it will likely be due to plummeting values rather than the fear of theft.

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Hackers steal $34 million in second Ethereum cryptocurrency theft this week - PC Gamer

Introduction

Cryptocurrencies have recently attracted increasing attention from investors and businesses as they promise to provide innovative, secure and cost-effective solutions that improve the current money transfer system and enhance the efficiency of transactions. Cryptocurrencies have also proved to be a volatile market with unpredictable price swings and rapid introduction of new coins that constantly disrupt the current market equilibrium. In this article, I endeavour to explain the key factors that drive the valuation of cryptocurrencies.

A cryptocurrency is broadly described as a cross between a commodity and currency as it stores value and has a finite supply but is also liquid and can also be used to pay for transactions. Fundamentally, its price is determined by supply and demand, as any other asset price is determined. Most, if not all, cryptocurrencies have a finite supply that is either already in circulation or will slowly start decreasing until it reaches a known limit. Due to this, the price of cryptocurrencies is driven primarily by factors that affect demand.

The value and demand for any currency, especially fiat currencies, is derived from the trust of its users in its ability to preserve its purchasing power. When a currency loses trust, its value drops precipitously, exemplified by Argentinas peso during its hyperinflation days.

Cryptocurrencies are no exception. Bitcoin gained traction because users believe in the complete anonymity and security of its blockchain ledger. Since it could not be hacked or tampered with, it would always preserve its value. Similarly, Litecoins value rapidly increased when users understood that it had features that surpassed Bitcoin in certain aspects, such as speed of transactions, and they believed it was the silver to Bitcoins gold.

Government trust, in terms of regulations, also plays a vital role in the success of acryptocurrency and affects its valuation. The original scepticism with Bitcoin was principally due to the belief that governments would never legalise it, owing to fears of facilitating money laundering and black market trade. This was exacerbated by the fact that Bitcoin initially gained popularity as the method of payment in Silk Road, the first modern dark-net black market which was infamous as a platform for selling illegal drugs.

However, governments have looked at cryptocurrencies more favourably than originally assumed and have understood the potential that blockchain technology has in improving efficiency. The impact of government trust on valuations is evidenced by the price spikes that occur when governments legitimize it. Bitcoins total valuation soared to more than $1bn in mid-April this year when Japan and Russia moved to legitimize it. During mid-June, Ethereums price spiked to above $400 when some Asian governments legitimized it in part as a form of payment.

Value investors who invest in cryptocurrencies estimate their value based on the market capitalization of the process or asset it seeks to replace along with an estimation of how much market share the cryptocurrency will control. For example, Bitcoin enthusiasts who believe that bitcoin is a form of digital gold, as Satoshi Nakamoto intended, will take reference from the market cap of the gold market $7trn.

If Bitcoin were to control even 1% of golds market cap, its valuation should be $70bn compared to the current valuation of $36.5bn implying that it is undervalued. Other common examples are estimating Bitcoins value based on the remittance market and Ethereums value based on the IPO market which it seeks to replace with ICOs (Initial Coin Offerings).

However, this method of valuing currencies is risky as it depends on factors, such as the possibility of the emergence of more efficient cryptocurrencies, that are impossible to predict accurately. The investors personal beliefs are also reflected in his choice of the prospective market that the cryptocurrency would replace.

As with any other asset, speculation is a strong driving force in determining the value of cryptocurrencies. Speculation is affected by the perception of cryptocurrencies and is directed by new updates and developments. For example, improvements in liquidity through the establishment of new exchanges leads to a price increase as speculators believe that more people will start using the currency and drive up its price.

Similarly, the introduction of a new coin that performs the same function as an existing one but has increased transaction speed and lower cost would send the existing coins valuation spiralling downwards. The highest short-term price swings are currently in the cryptocurrency market some have spiked by 1000% in less than a week and this attracts traders and other investors who wish to profit from these swings. Furthermore, these wild swings are not just confined to the newer coins but are prevalent even in the established ones.

Many traders do not understand the technical aspect of this market and simply wish to gain from the greater fool theory wherein the assets fundamentals carry no importance if they can sell it to someone at a higher price. These trend-followers exacerbate the price movements by encouraging feedback loops and herd mentality. Furthermore, low-volatility and overvalued metrics in traditional markets have accentuated the attention of investors in cryptocurrencies as it remains one of the few areas which can rapidly deliver huge returns.

Cryptocurrency valueis driven by the demand-side factors that have been explained in this article and the trajectory that investors expect the market to take. Many investors and economists believe cryptocurrencies are currently in a bubble as ICOs are attracting a lot of capital, the market has an uncanny resemblance to the dot com boom and everyone is bragging about how easy it is to make money.

Others believe that the boom has just started and the valuations of cryptocurrencies will increase tremendously over the next decade as they replace traditional forms of money transfers and contracts. The rest believe that in the same way as the dot-com boom left behind Google, Facebook and a plethora of revolutionary technological companies, the cryptocurrency craze will eventually lead to a bust that will leave behind a few cryptocurrencies which will shape the way we transact.

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What Drives the Valuation of Cryptocurrencies? - The Market Mogul

If youve ever had a company or friend offer to pay you with Bitcoins or another type of digital money, youve encountered cryptocurrency, also called crypto-money or cryptoassets.

Cryptocurrency is a digital currency that is created through the use of encryption software. This approach is a solution to security and control issues that prevented a purely digital currency from being successfully developed in the past. If you hear someone talking about one of these currencies, its almost certainly in a cryptocurrency format. This type of digitally created and secured money is currently in a period of very cool experimentation, so lets take a look at how it work, why its popular, and where cryptocurrency is heading in the future.

How does a currency exist in a totally digital format? What is it based on? While the process varies a little between different cryptocurrencies, they all follow the same general system.

First, cryptocurrency chooses a base unit and how much that particular unit is worth when compared to other currencies (often, the U.S. dollar is used as a baseline). Some cryptocurrencies are more imaginative than others at this point. They try to represent debt registries, contracts, or the act of currency exchange itself. It can get a little weird, but ultimately the unitin some way relates to the value of other currency, as is true of all currencies in the world.

Units of cryptocurrency are then created, typically when a transaction occurs. The units are carefully formed and preserved through algorithmic encryption, then linked together in vast chains of data, where the currency can be tracked and exchanged.

However, at this point, cryptocurrency is still too vulnerable and too easy to fake. The currency units need to be timestamped and processed to make them more concrete and harder to copy. A third party developer can do this, but most cryptocurrencies prefer to crowdsource the process to those with the right hardware and software to mine the currency.

Mining uses algorithms to go through each transaction, encrypt the cryptocurrency, and add it to a digital ledger, essentially verifying it and cementing its position online. This process may also be referred to as consensus protocols orconsensus platforms, depending on the currency. This process is meant to make the currency impossible to duplicate, though whether its successful is up for some debate.

Some cryptocurrencies are highly centralized, with someone usually the organization that created the process/software making decisions about how much currency is created and how it is used. Other types are very decentralized, controlled only by how and where people are willing to use them.

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Cryptocurrency explainer: Everything you need to know