Why Cryptocurrency May Become Your New Currency
Even with as much attention as cryptocurrency has received over the past few years, there is still a pretty hefty segment of the population that doesn't quite understand what they do. For some, there is a built-in confusion with the technological aspect, or perhaps they don't make the effort to learn because they feel it might be too complex. Others might actually have an idea about the coins that is incorrect, perhaps spurred on by some false information spread by detractors.
Cryptocurrency can certainly do a lot of things, especially considering how versatile the blockchain technology on which it is built can be. Perhaps more than any other characteristic, cryptocurrency has the ability to be a kind of alternative currency from what you have been accustomed to for your whole life. Not only is it an alternative, but it is also a choice that can actually improve upon the status quo.
Although cryptocurrency has come a long way since its infancy, there is still a lot of room for it to grow. If you think that the fad has passed you by or that you might be too late to get involved with cryptocurrency on a meaningful level, you might be off-base. By learning about how this combination of technological advance and financial game-changer works to replace traditional currency, you can eliminate the mystique and get to the core of what makes cryptocurrency so special.
How Traditional Money Works
You have probably been using traditional currency for so long that you haven't really stopped to think about the conditions under which it is utilized by the public. More than anything, traditional currency, also known as fiat currency when referring to physical manifestations of money, is a tool of the governments that produce it. The supply of the currency is controlled and manipulated by the country in question for their purposes, many of which are often antagonistic to the needs of their citizens.
There is also the fact that these currencies don't travel very well. When you try to spend money in other countries, you generally have to convert into the fiat currency of those countries before you can proceed. That also means that you are subject to exchange rates, which can change the value of your currency, again due to forces beyond your control.
On top of all that, there are the institutions that you have to engage just to make simple transactions. Banks are at the epicenter of most financial doings by the average person, and they often attach fees to their services. In addition, they can make decisions regarding your money, such as freezing your account, for which you have no recourse.
For most of the modern era, people have just assumed that these conditions are just part and parcel of life. Short of withdrawing your money and caring for it yourself, there really was no way around it. But a group of developers connected by the internet began to ponder if there was any way to create a currency that would do an end run around governments and banks and could belong solely to the people.
Bitcoin as Alternate Currency
The solution that this mysterious group reached, which was announced to the world via a white paper published under a pseudonym, was called Bitcoin, the world's first cryptocurrency. The idea behind cryptocurrency was that it would be a currency that would be decentralized, meaning that there was no controlling body, be it a government or a bank, in charge of it. On top of that, Bitcoin was set up so that it could be transferred in"peer-to-peer" fashion, meaning that it could be passed from one regular person to the next with nothing in between to interrupt, slow the transaction down, or impose fees upon it.
The way that it did this was by employing technology known as the blockchain. The blockchain enables people to conduct transactions over a network that is unfettered by any third party. A group of"miners" validates the transactions by solving cryptographic problems, their proof of work being necessary so that there can't be any fraud, charge-back, or anything that might be associated with traditional internet transactions.
While it's hard to say for sure if that group was trying to create some sort of financial revolution or if they were just attempting to solve a theoretical problem, the Bitcoin movement, which also launched cryptocurrency, soon started to gain steam. And it happened in more ways than one might have imagined.
How Cryptocurrency Improves Upon Traditional Currency
Once people got a hold of cryptocurrency, it became clear that there were many practical uses for it. The blockchain really could be employed in any situation where there would be a third party in the way. But for the sake of the discussion about alternative currency, it soon became clear that Bitcoin and its imitators could boast of a bevy of advantages over their traditional fiat competitors.
As stated above, traditional money can't really be used in another country without the user first jumping through some hoops. With cryptocurrency, those hassles are largely taken out of the equation. It is a peer-to-peer network, and there is really no limitation to the peers in question as long as they have the capability to deal in cryptocurrency.
That capability depends on two things. First, they need to have an internet connection. Second, they need a digital wallet.
As you might imagine, that brings a lot of far-flung places of the world into play in terms of possible cryptocurrency partners. There are many locations that are nowhere near a bank or anything similar, making a traditional financial account for people in that vicinity unlikely. But cryptocurrency brings them the opportunity to get involved on the same level as someone coming from a hub of activity.
In an era where people are often divided by all kinds of barriers, the way that cryptocurrency opens up the world is one of its best advantages. Small businesses, in particular, can go global in a heartbeat by using cryptocurrency.
When we say middleman here, we are referring to the banks and credit card companies and other financial entities that tend to have a say in practically every aspect of personal finance. What they bring to the table for the individual is some sense of security, for sure. But they also impose fees, slow things down, and arbitrarily make decisions about the money that you've entrusted to them.
By using cryptocurrency, a person can bypass a lot of those hassles. They can also leave behind the concerns over their personal information. Anytime you use a bank card or a credit card, you are at great risk of losing vital data to criminals.
Even if the institution holding your money faces theft or cyber-attack, your information will be up for grabs. But none of that is a concern when using cryptocurrency. That's because cryptocurrency doesn't sacrifice any more information than what it needed to complete the transaction.
For example, if you are buying something worth five dollars in American money and do so by using a fraction of a cryptocurrency such as Bitcoin, only the data involving that five dollars changes hands. Your whole account doesn't go to the receiving party or the party helping the transaction go through. Neither does any personal data, unless the cryptocurrency network in question requires it of you.
If it seems like time and money are two of the hardest things for you to save in your life, you'll be happy with cryptocurrency. The fees that are impossible to avoid when using things like bank cards or credit cards are largely absent from cryptocurrency. In addition, the long wait times to see the money paid to you actually make it into your account are also brought down to the absolute minimum by the relatively instant settlement process available with cryptocurrency.
Other than that, cryptocurrency also is easy to use, even for those who may not understand the technology. Basically, if you've dealt with a smartphone and passwords for websites, you have the technical know-how to make a cryptocurrency trade. All it takes is a digital wallet, which could be a downloadable one connected to the internet if you plan to use the digital coins often, or a hardware wallet that offers the best protection for the coins you have.
The Investment Aspect of Cryptocurrency
That's because the coins are limited to a certain amount and only have their supply raised a tiny bit with each transaction processed. As a result, the fluctuating demand for the coins often causes them to rise or fall.
This can be disconcerting for some people, as they like to have some sort of stability in their monetary supply. But the possibility that the prices of the coins could soar gives an extra layer of promise to a cryptocurrency transaction. Considering where the prices are today compared to where they were when the coins first were created, that promise has been realized for many early adopters who became quite rich from possessing the coins.
Why Cryptocurrency Hasn't Yet Supplanted Traditional Money
If cryptocurrency has all of these things going for it, one who didn't know any better might have expected that they would have already wiped fiat money right off the map. But that is far from the case. In fact, cryptocurrency still has plenty of hurdles to overcome before it can be considered anywhere near on par with traditional currency in terms of popularity. Here are some of those major obstacles.
In an ideal future for cryptocurrency, you would be able to walk into any store or shop anywhere online and use your coins to buy goods or services just as easily as you would with cash, a check, or some kind of bank or credit card. But unfortunately, there are still precious few companies of note who service crypto payments at their establishments.
That figures to change as time goes on and the coins are understood by more people. But at the moment, the coins just aren't in circulation enough for them to even come close to the volume of use for traditional fiat money.
There are many people who became rich when the first cryptocurrency offerings that they purchased rose dramatically in value. In addition, some others came on board when the coins endured a rockier stretch. But the common ground between these two groups is that they seem far more willing to hold onto the coins rather than utilize them as currency as they were intended.
That leads to a kind of self-fulfilling cycle with the sellers that we mentioned above. Since the coins aren't being spent, the businesses don't have any reason to offer cryptocurrency services. That gives even less incentive for those who are holding onto the coins to try and use them, since there aren't any prime places to spend the money.
Perhaps the most basic factor holding people back from getting involved with cryptocurrency, as either a buyer or an acceptor of the coins, is that they have a natural skepticism towards anything technological. They might think that, because the coins aren't physical and are in the digital sphere, they can be easily manipulated or hacked. Or they might simply lack the knowledge about the subject.
What also makes it tough for people who don't know much about cryptocurrency is that it is hard to get proper information about it. The naysayers are quick to point out the weaknesses without noting the many strengths of the coins. It makes it difficult for people to know what to believe when it comes to cryptocurrency.
Cryptocurrency has certainly come a long way from humble beginnings to become one of the most talked-about innovations in many years. Many true believers think that the day when the coins take over from traditional currency isn't long in coming. They feel that, at some point, the people who initially were reluctant to try cryptocurrency will find that the coins are something that they need to have in their life, as they once did a cell phone or the internet.
Most likely, cryptocurrency will continue as it is for a while, gradually picking up more users along the way. At some point, the idea of it replacing traditional currency seems like it could be more than just a pipe dream.