What Can Cryptocurrencies Provide to the World?
Cryptocurrencies are a very important revolution for the economy and the whole world. They provide the society a new way to transact money or save funds. During 2017, Bitcoin, the most famous virtual currency in the market, surprised everyone when it reached $20,000 dollars in December.
But which are the benefits of using Bitcoin and other cryptocurrencies? Is not the same to use dollars, euro or any other fiat currency? Well, there are several differences that make virtual currencies completely special, and better than any other sovereign currency.
At the same time, digital currencies are powered by blockchain technology, that has an important number of different use cases in many industries. So, cryptocurrencies can be applied in many different fields, not like fiat currencies.
As mentioned before, it is possible to transfer money directly to another person – that is, without depending on a third party – in just a few minutes and almost for free. This is helping many financial institutions, companies and individuals.
Pay With Virtual Currencies
The most important and most known use case is related to the payment. It is possible to send and receive payments using Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH) or any other currency in the market.
When financial institutions fail or cannot provide services or products, virtual currencies are able to help people. The current economic system relies on trust. The trust that two parties can have in each other. We need to give our saves or funds to a third party that will process the transaction for us.
All of these providers could go offline at any moment, experience difficulties or governments could restrict the access to them. And indeed, several times, transactions cannot be processed because are first reviewed by governments or the institutions themselves.
For example, back in 2001, Argentina declared default and banks took the savings of the people without even informing about it. From one day to the other, tens of thousands of individuals lost their life savings. Nobody would be able to shut down Bitcoin. Even if a country cuts access to internet or electricity, miners all over the world would replace them.
Cryptocurrencies are totally different. Why to place trust on a third party when it is possible to send money from one person to the other just relying in the blockchain. Users do not need to put their trust in another institution, they send the funds, and miners confirm the transaction.
The direct digital exchange is not possible with traditional currencies. If a person wants to send traditional sovereign currency it will have to wait hours or days for the transaction to settle and pay for high commissions that the banks take.
Sending some funds using BTC may cost just some cents if the network is not congested.
Cryptocurrencies To Store Value
It is possible to store value using virtual currencies. Cryptocurrencies could help people store money, and be protected against populist governments or expansive monetary policies. Additionally, users managing digital currencies will have a private key that they will always need if they want to send a transaction.
The user is the real bank. Individuals are the owner of their assets and nobody can do anything to them unless they have the private key. This is a very important thing in cryptocurrencies, one of the most valuable features of them.
If citizens cannot trust institutions – in countries like Venezuela or Argentina – then, they may trust a system that does not require parties to trust each other. At the same time, cryptocurrencies cannot be confiscated, destroyed, etc. Additionally, there is no central institutions that would be able to print more banknotes and create inflation. Cryptocurrencies tend to have a limited supply, such as the one of Bitcoin capped at 21 million BTC.
In Venezuela there are many stories of people living entirely relying on cryptocurrencies. We are talking about it as something normal, but if we stop for a moment to think about it, this is a very surprising thing. Just to mention an example, there are more shops accepting Dash cryptocurrency in Venezuela than in any other country in the world.
But there are still some challenges to modify. We are talking about hacks in exchanges, scams and unregulated markets. Companies should do everything as possible to reduce attacks and to evolve into a more prepared and mature ecosystem.
Another important point to mark is that virtual currencies allow individuals to send and receive micropayments. Before it was almost impossible to pay some few dollars with a bank transfer, or send money to another country in small quantities.
By removing the middlemen, it is possible to reduce the cost of the transactions, and consequently, remove the barrier that did not let individuals send or receive small sums of money.
This is very important to reduce costs of companies and customers all over the world. Let’s suppose you are in an airport or train station and the free internet connection has a bad quality, it may be possible to buy a better one just by paying a few cents. The same with other industries and things in our daily lives.
Another example can be related to newspapers allowing customers to pay for the articles they read. That means, that there will be a greater price discrimination from the company, and more engagement from the community, allowing the newspaper to receive more visitors, and potentially receive more money.
This is also an important use case of virtual currencies and blockchain technology that fiat currencies do not facilitate. Aside from sending and receiving money, it is possible to write smart contracts. These are more complex transactions that include scripting capabilities.
For example, if we want to process a transaction on a specific date (let’s suppose in 2 years from now), it is possible to create a smart contract that will launch the transaction in the moment requested.
But smart contracts can be used in many different ways, fields and situations. Of course, sovereign currencies do not allow users to perform these actions.
Of course, it is very important to have clear smart contracts, without mistakes or bugs, because if there is a problem, the results could be undesired.
Extra-Monetary Use Cases
But there are other ways in which it is possible to apply the technology behind virtual currencies. In the examples mentioned before it was possible to see how blockchain currencies could be moved from one place to the other in a very smooth way, and how they differentiate from traditional currencies.
Blockchain technology can help other industries as well. For example, the international commerce industry is very bureaucratized, something that creates very big expenses for companies and individuals. But using blockchain technology it is possible to track a shipment that was sent from Asia to a port in the U.S. with minimal effort and big benefits.
At the same time, it is possible to bring transparency to public agencies or companies.
Virtual currencies expanded all over the world, but they have created several enemies, in part because they have been used by criminals and because they threaten traditional financial institutions.
However, the benefits of using cryptocurrencies are countless and could help societies become much better. Of course, it is very easy to say that they are bad without knowing anything about them, but they are really helping build a whole new world, more fair and built around individuals.