Since its creation in 2008 by the mysterious Satoshi Nakamoto, Bitcoin marked the arrival of the cryptocurrency revolution.
Even with the slew of peer coins or altcoins appearing in the market, cryptocurrency’s promise to revolutionize the financial market remains to be met with a healthy dose of skepticism.
And yet, tech conglomerates like Amazon, Facebook, Google, and Yahoo!, are either incorporating cryptocurrencies on their platforms or creating their own.
Cryptocurrencies Are Liquid To All Fiat Money
For the longest time, the barter system was the standard for trade, however, it had its limitations.
Because if Mr. A is trading fish for clothing, it’s hard to put a fair amount on how much fish is equivalent to how much clothing.
A dilemma ultimately solved when fiat money came around, as it provided a fixed value to goods and services.
But, as digital currency experts like Crypto Head points out, fiat money also has its own limitations, which they believe cryptocurrency can address.
For one thing, cryptocurrency is supported by blockchain technology. This makes transfer of money easier, more secure, and more cost-efficient for users.
In comparison, fiat money has to go through intermediaries, like banks, lawyers, or the government.
Cryptocurrencies Run On A Decentralized System
Unlike the current financial system, cryptocurrencies are built to leverage blockchain technology. Allowing for a more transparent, decentralized, and immutable transfer of funds worldwide.
Not only does blockchain use peer to peer network to minimize transaction costs, its decentralized system also makes it more secure by eliminating a single point of failure.
Centralized financial systems fail because their system goes from top to bottom. So any hitch at the top affects everything down the line, making fiat money susceptible to a crash.
Meanwhile, the decentralized system of cryptocurrencies avoids this by utilizing a network of computers instead. Making the system more resilient to attacks and economic uncertainties.
Lower Commission Charges and Faster Transactions
Many banks, exchanges, and other financial institutions charge a high fee for transfers.
For example, in order to make a transaction on more popular platforms the charge is about 2.9% of your total transaction.
This means, for a $100,000 the company gets a whooping $2,900 transaction fee on that transfer.
Another issue with these transactions is that the high commission rates do not guarantee the quick completion of your transaction. Sometimes it can even take up to three days like the now relic SWIFT.
Blockchain technology or other DLTs make it easy to use cryptocurrencies. With superfast transfer time and minimal charges, more and more people are looking to cryptocurrency as a financial option.
Lack Of Fraud And Identity Theft
One of the biggest draws of cryptocurrency is its transparency. All blocks indicate all data about the transaction including the sender, receiver, and the amount.
Add to that that all of this information is documented on a public ledger. So all those involved in the transaction, can easily verify each other’s credentials.
Another anti-fraud feature of cryptocurrencies are wallets. A wallet is a program all cryptocurrency users must install to make transactions. These are used to store your coins and let you know the total of the coins you have.
For example, when you store one Bitcoin in your wallet, it checks the transaction against the mining network records. Which then informs the blockchain that there’s one coin in your ownership.
And because every wallet has its own unique address and equipped with their own public and private keys on top of that, committing fraud or identity theft proves to be very difficult.
Cryptocurrencies Have The Potential to Increase Global Financial Inclusion
Highlighting the huge financial services gap within the global population is the estimated 1.7 billion unbanked adults in the world today – in both developed and developing nations.
Cryptocurrencies can be the key to solving this inclusion problem that traditional banking systems seem unready to provide solutions to.
Majority of the people in the most affected regions make use of mobile money services but they are not near enough to solve the prevailing banking problem in these regions.
Cryptocurrencies can leverage on the fact that more people have mobile devices and better access to the internet today to solve the financial inclusion all at once.
However, typical of the banking system to any upsurge that might affect their businesses there has been an alarming lack of reception for cryptocurrencies within the banking world.
Tech Giants Are Cryptocurrencies Crazy
These days, you’ll find it challenging to find a significant technological company that isn’t getting into cryptocurrency.
A good number of big tech companies started their own personalised cryptocurrency projects. Some of the companies getting on the cryptocurrency bandwagon include:
- Facebook: Recently, reports of Facebook registering a company named Libra Networks surfaced on the internet. It’s poised to be the launchpoint for Libra, Facebook’s own cryptocurrency. It’ll be focused on reaching the world’s unbanked and underbanked.
- Google: Google had earlier banned cryptocurrency ads and removed cryptorelated topics off YouTube. However it seems to be softening on its clampdown on cryptocurrency. It now plans on enabling new cryptocurrency related search tools which will display results from related searches in a more user friendly manner;
- Yahoo!: Yahoo! is a major stakeholder in a new Japan exchange called Taotao. The exchange will start off trading five cryptocurrencies which include Bitcoin and Ripple.
- Amazon: Amazon had earlier announced that they were not looking to venture into ‘speculative’ areas. Regardless of these statements, they have gone ahead to register three cryptorelated domain names and patented Merkle trees, a solution to the proof-of-work algorithm used in cryptocurrency.
The uncertainty in the world of finance is still high. Especially with many organizations concerned about the likelihood of a failure because of its highly centralized structure.
Cryptocurrency keeps provides a fraud-free, decentralized, and innovative financing alternative to many worldwide.
However, cryptocurrency and blockchain technology is still in its infancy and many experts caution to approach it carefully.
Experts also predict that an increased adoption of cryptocurrencies will help boost their viability and maybe, just maybe, usher in a new era for money.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
I am an entrepreneur and a writer with a bachelors degree in Computer Science. I manage the blockchain technology and crypto coverages at Coingape. follow me on Twitter at @arya_achal or reach out to me at achal[at]coingape.com.