As popular as it has become among its adopters and investors, cryptocurrency is still a mystery to a large segment of the population. Many people may have heard vague rumblings about Bitcoin and the high value of the coins. Some also might be under the impression that the coins are illegal, as there are certainly rumors to that effect that go around from time to time.
In truth, cryptocurrency is quite legal, and it has become a force as an investment property for those with the foresight to realize it as such. It is also starting to make its way forward as an actual payment system and method of connecting people, without the need for a third party to get involved to impose bureaucracy and fees. The people who are in the dark about it are missing out on the opportunity to get in with cryptocurrency while there is still great value to be had from it.
That time may be running out. Each day, more and more people buy cryptocurrency coins. In addition, institutional interest in the coins has never been higher, meaning that it might not be long before the coins hit the mainstream. Before that day arrives, you should take some time to try and understand cryptocurrency and all about these mysterious tokens and the benefits they convey to users and investors.
The Basics of Cryptocurrency
Cryptocurrency began with Bitcoin, a digital token created in 2009 by a team of developers. It sprung from an idea to return financial independence to everyday people. These developers tried to find a way for a transaction to be made, from peer to peer, and be verified as legitimate without the need for a third-party overseer.
This problem was solved via the blockchain, a unique technological idea that created a decentralized currency. By employing a network of computers all working to verify peer-to-peer transactions, the blockchain could enable this to happen. Bitcoin was the first coin created, as a means of payments between parties to take place.
Soon, other developers and entrepreneurs realized that the blockchain could be used for more than just paying and receiving money. As a result, new cryptocurrency coins began to spring up all over the place, each trying to solve some sort of basic problem that would unite people and free them from the tentacles of large corporations. Some of these coins have risen from nowhere to become successful, while others have fallen by the wayside in a kind of survival of the fittest situation.
Cryptocurrency as Investment
Originally, cryptocurrency, as stated above, was meant to be a tool that solved societal problems. But the coins themselves began to take on value in terms of their supply and demand. Bitcoin, in particular, started to rise in value as more and more people became fascinated by the potential of this technology.
Suddenly, cryptocurrency took on a life of its own as an investment. People began to rush in to get on board, and the price of the coins skyrocketed out of nowhere. Although the prices of most cryptocurrencies have fallen from their peaks of a few years ago, they are still quite robust compared to what the coins were worth in the early days.
As a result, many people see the coins as an either/or proposition, either an investment or an actual method of improving their lives. The truth is that it can be both, and that is one of the first benefits that needs to be mentioned. Most fiat currencies like the American dollar serve a simple purpose, but cryptocurrency is far more versatile than that.
Paying for Things with Bitcoin and Other Cryptocurrency Coins
The idea behind cryptocurrency is that it should do all the things that fiat money does but with much less hassle. At the moment, it is being held back from reaching its full potential by the fact that not enough people and businesses have the capability of accepting it as payment. They are missing out on the incredible innovations that the coins can provide.
When you pay for something using, for example, a bank card or a credit card, you are essentially providing a ridiculous amount of financial and personal information to make this happen. Even if you want to buy something for two dollars, practically your whole account is provided to the vendor. That’s because these cards work on the so-called “pull” protocol; they pull all of your data no matter the size of the transaction.
By contrast, cryptocurrency works on a “push” system. If it takes you two Bitcoin to buy something, that bit of data is the only information that is shared with the receiving party. In that way, privacy concerns are front and center with cryptocurrency.
Speed of Settlement
For a small business wanting to receive payment via bank transfer or credit card, there is often a frustrating delay before the money makes it into their account. That can be problematic for the cash flow of that business. But a cryptocurrency transaction will register in their account within minutes.
Since every part of a cryptocurrency transaction is verified by the network and recorded digitally for all parties to see, the possibilities of fraud are practically obliterated. In addition, you don’t ever have to worry about a charge-back, as might take place with a credit card. The very nature of the blockchain ensures that all payments go through without incident.
Free from Fees
This is a big lure for cryptocurrency adopters. The fees imposed by third parties in overseeing payments can be significant, especially for a business needing to process credit card transactions. With a cryptocurrency transaction, there are no longer any fees for the seller, and only minor fees, if any, attached to the buyer.
If you have ever tried to buy something from overseas, you know that there are any number of charges that can be tacked onto the purchase. There might even be some restrictions placed on the transactions made across borders, not to mention tariffs and exchange rate issues. Cryptocurrency simply allows people to transact no matter where they are located in the world. In divisive times, such utility is truly worthwhile.
As you can tell, the benefits attached to using cryptocurrency as a replacement for fiat currency are numerous. But what about the coins that stretch beyond that and serve all kinds of purposes? The applications for these coins are practically limitless, but we’ll examine a few of them here.
Smart contracts are one of the hallmarks of the Ethereum network, which operates on a cryptocurrency known as Ether and is one of the few true competitors to Bitcoin’s dominance in the crypto sphere. These contracts are set up on the blockchain between two parties and can automatically be set into effect once terms are met. Hence there would be no need for lawyers to come into the picture, which often drags out the time of the settlement and adds serious fees to the process.
Real Estate Transactions
Imagine a setup where you wouldn’t have to go through a bank to either buy or sell a home. You could simply connect with an interested party via the blockchain, come to terms, and then have them verified. Again, no extra fees would enter into the process.
When you play video games, you generally have to do it by either buying an in-home system or participating online and paying a hosting company for the privilege (or sitting through ads). What about a decentralized gaming system, whereby developers and players can be hooked up directly? Such scenarios already exist on the blockchain via cryptocurrency platforms.