Image by 3D Animation Production Company from Pixabay
Centralized financial systems have long been vulnerable to manipulation and seizure. So it’s only natural that the following great monetary tool will be decentralized. The platform has features like high compatibility with all devices, a massive range of trading tools and many more. That’s why cryptocurrencies are the most viable monetary tool. If you are interested in Bitcoin trading, you may consider knowing about Bitcoin Network Scalability.
This new digital currency is theoretically impervious to outside interference or other geopolitical concerns that might factor in more traditional economies like the U.S. dollar, euro, or yen. In addition, cryptocurrencies allow people to send money worldwide instantly and efficiently without waiting for remittance services or banking procedures (or associated fees).
People can use cryptocurrencies for many other things besides payment, but their utility for everyday transactions is unsurpassed. The rise of this new electronic cash is a small yet exciting step towards a decentralized world.
The Future of Money: Introduction to Cryptocurrency
Bitcoin (BTC) and the other more obscure altcoins are increasing in number and value. Like any other currency, you can use bitcoins to pay for goods and services on local forums like eBay, Etsy or Craigslist, where there’s no third party to get in the way of your transaction (no PayPal fees or Amazon fees). But there are many more uses for cryptocurrency, especially in tech-savvy communities.
Financial transactions can be conducted across continents within minutes, essentially making international payments free of charge and eliminating the need for banks as an intermediary. Even better, as more people begin to use cryptocurrencies, the increased demand will help increase their value.
Pros of using Cryptocurrency as a Monetary Tool:
Banks are unnecessary (therefore, fees are eliminated)
Centralization of power is a negative thing. If a powerful centralized party broke the decentralized nature of cryptocurrencies, they could print their worthless currency. The U.S. dollar and the euro are examples – governments can change the rules to their advantage at any time. Further, suppose a government or central bank felt threatened by cryptocurrencies. In that case, they could crack down on them, as demonstrated by China’s recent decision to ban payments using bitcoin and other digital currencies.
Transactions are instantaneous and borderless
Cryptocurrencies have the potential to disrupt global payments significantly. Some banks charge up to 5% per transaction for U.S. dollars. In other countries, it can be even higher. Cryptocurrencies are currently the only way to make international payments quickly and costlessly.
Security is strong:
Cryptocurrencies like BTC offer robust security features that are hard to recreate in any centralized form of currency. However, the most worrisome threat to cryptocurrencies is that they are decentralized and, therefore, not controlled by a central party such as the Federal Reserve or governments like the U.S. dollar or euro (which have proven to be deeply flawed).
No Third-party Interference:
No bank or government-authorized entity will ever be able to interfere in a cryptocurrency transaction – they’re entirely decentralized. While this offers excellent security benefits, an unregulated market also means that anyone can trade between themselves without regulation or oversight by any governing body.
Traditional banks and governments see cryptocurrencies as a threat to their sovereignty, so they’re trying to regulate them (but with little success). Determining cryptocurrency values can be difficult. Its value is determined solely by supply and demand. Fortunately, the technology behind this new economic phenomenon is relatively simple. Cryptocurrencies are digital tokens that live on the blockchain and are exchanged for goods and services.
Cons of using Cryptocurrency as a Monetary Tool
There’s no physical, tangible money to grasp
One of the most frequent complaints is that there is no physical money to represent a cryptocurrency. Most cryptocurrency exchanges do not have facilities or staff – they’re all online. As the market matures, this may change (as in Japan, where you can trade bitcoin for cash at specific locations).
Cryptocurrencies are volatile:
Another frequent complaint about cryptocurrencies is their fluctuating value – a Bitcoin. The good news is that this volatility decreases as more people accept it as a form of currency, and its marketplace becomes more sophisticated. However, cryptocurrencies are still a risky investment, and their market is subject to the whims of speculators.
While cryptocurrency’s monetary value is relatively easy to determine based on supply and demand, its market value is entirely subjective. When you buy bitcoins, you’re buying into a currency with no inherent value other than its ability to be used as a form of payment, like dollars or euros.
Cryptocurrencies may be one of the best inventions in years for international transactions because – unlike credit and debit cards – there are no third parties to deal with. They are fast and easy to use too, but they still have their limitations and should not be seen as an alternative to fiat money by any means yet.