Cryptocurrency is a digital currency. While the traditional form of money can is available digitally, this is never the case with cryptocurrency. The popularity of cryptocurrency is rising by the day. It is even becoming mainstream. In some quarters, it is possible to buy goods and services using cryptocurrencies as means of exchange. However, such a payment is only possible electronically.
The technology behind cryptocurrencies is what sets them apart. There are so many problems associated with the current money system in the world today. The use of cryptocurrencies as means of exchange will help to resolve many of the problems.
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- Wire transfer and credit cards are somewhat archaic payment systems.
- Brokers, banks, and middlemen remove particular percentages from the amount of money as transaction fees. As a result of this, the transactions are slow and expensive.
- There is a rise in financial inequality across the globe.
- Financial services are inaccessible to many people across the globe. Studies show that this category of people is up to 3 billion; this represents about half of the world population.
The human race can solve many of the problems above by opting for cryptocurrencies as means of exchange.
Cryptocurrency basics
Government reserves its traditional currency in banks and you can withdraw your money using an ATM or via other means approved by the bank. You will never have to go through the government or banks if you are making transactions using cryptocurrencies. This means that the use of cryptocurrency can put the middlemen out of business. Cryptocurrency depends on blockchain as its operating technology. Blockchain is decentralized. This means that there is nobody in charge of it. It does not rely on banks for transaction confirmation; it rather relies on the computers in the network for confirmation of transactions.
Money definition
Before money can have value, it must have the characteristics below:
- It must be readily available to a large number of people.
- Merchants must recognize and accept it as a means of exchange or a form of payment.
- It must be trustworthy to society.
The value of the money you pay needs to sync with the value of the product you are purchasing. Thanks to the introduction of money, individuals do not need to bear the load of carrying gold bars from one place to another. The introduction of money or cash was to find a solution to this problem. Credit cards came in to further simplify the process, but this also puts governments in total control.
Cryptocurrencies offer a good alternative to cash because it puts the people and not the government in charge. This is especially the case because many governments rarely have the interest of the people at heart. So, cryptocurrency helps to knock out the unconcerned, uncaring government policies regarding money.
The introduction of cryptocurrencies also changed the identity of traditional money to fiat currency. Fiat currency has value only because the government says so. Examples are banknotes and coins.
History of cryptocurrency
Bitcoin is considered the first cryptocurrency ever. It is also the most popular of all the types of cryptocurrencies around. The developer of bitcoin is Satoshi Nakamoto and he went public with the idea of bitcoin in 2008.
Though, no one can clearly say he has ever seen this individual before. In fact, the name is not real. When bitcoin came, it was described as a purely peer-to-peer version of currency. Since 2008 to date, several other cryptocurrencies have surfaced. However, none of them has the same value as bitcoin.
You can access cryptocurrency via mining. This is not the same thing as the traditional mining process that we all know. Traditional mining takes place at mining sites offline, but cryptocurrency mining takes place online. The mining process involves the use of computers to solve complicated problems.
The other cryptocurrencies aside from bitcoin are called altcoins. The main purpose of creating altcoins is to add more anonymity, security, and speed to transactions with bitcoin and other cryptocurrencies.
Litecoin was the first among altcoins. While bitcoin can be referred to as the gold of cryptocurrencies, Litecoin can be called the silver. There are now over 16000 cryptocurrencies in circulation and many more are coming up. So, you can expect the number of altcoins to increase in the near future.
Benefits of cryptocurrencies
Cryptocurrencies are a better alternative to traditional money. The traditional money is government-based and this makes the government its central authority. Cryptocurrency, on the other hand, is not under government control. This is why many governments across the globe resist its circulation, knowing that they will not have control over it. Check below for some of the many features that make cryptocurrencies:
- Reduction of corruption: The use of fiat currencies can promote corrupt practices, but this is never the case with cryptocurrencies. Do not forget that fiat currencies are under the control of the government. This gives the government absolute power over currencies and the economy. Power corrupts and absolute power corrupts absolutely. The government can take advantage of its power over the economy for the self-enrichment of its officials. This is never the case with cryptocurrencies, which are not under the control of anybody.
- No need for money printing: cryptocurrency is a digital currency and not paper money. So, there will be no need to spend a lot of money to print paper money if governments can approve the use of cryptocurrencies as means of exchange. Aside from the cost incurred when governments print money, the process can also do more harm than good. The harms can surpass the positive effects.
- The people are in charge: The free circulation and use of cryptocurrencies as means of exchange will help to put the people in charge of their finances. Fiat currency gives all control to the government, but the use of cryptocurrencies gives control to the people using digital currencies. The government can freeze your account, but such a thing cannot happen if you use cryptocurrencies as means of exchange. You will never have to go through a middleman when you use cryptocurrencies as means of exchange.
