The world has entered a new era. Digital money is here, and it’s here to stay. Admittedly, the beginning of Bitcoin was a little bit shaky. Serious investors considered it as an interesting yet somewhat redundant experiment in computer science and identity verification, while others simply didn’t take it seriously at all.
Some people think cryptocurrency will replace other payment methods and become the default for online transactions. But how exactly does that work?
Transaction Ledgers Are More Efficient
With blockchain, your payment when trading can be verified without a middleman. This means you can avoid transaction fees and have a faster, cheaper way to pay. Blockchain transactions are verified by computers running the code at the same time. Once they verify the information in the transaction, they add it to their copy of the ledger. The whole thing is transparent, and anyone can see exactly what happened.
This decentralised approach reduces costs for both consumers and merchants because there’s no need for a middleman like PayPal or Visa to handle settlement. That allows peer-to-peer transactions that don’t require any intermediary, which is why blockchain technology is so promising for e-commerce providers.
Cryptocurrencies Are Less Expensive
This might not be true for bigger cryptocurrencies like Bitcoin or Ethereum, but smaller ones are definitely less expensive than traditional money. For example, Nano is a small crypto that can be used to purchase goods and services online. And whats more: the transaction fee is 0. Zero. It’s only a few dollars per coin, which means you don’t need to spend large amounts of money to get involved in this industry.
Most of the small cryptocurrencies are also extremely cheap to use, which means you won’t have to pay huge fees for things like transactions or withdrawals.
Immutable and Transparent Ledger
Blockchain technology makes it possible for people to create completely transparent ledgers. Cryptocurrencies exist on these ledgers as “smart properties” which can be owned and transferred by users, who can also hire others to manage their assets if they want to. Every transaction is logged, which means that you can see the entire history of a product from manufacture to sale.
This way, the risk of fraud is reduced significantly. All the transactions made with cryptocurrencies are immutable and verified by thousands of nodes across the world. This makes them impossible to hack or corrupt.
Cryptocurrencies Have No Central Authority
The first and foremost feature of a crypto is that it is not issued by any central authority. Any form of money that we have known till date, like dollars, euros, yen, etc., are issued by the central banks of respective countries. These monies are valid only because they are guaranteed by the central banks of their respective countries.
The monies give the central bank controlling power so that they can manipulate the supply and thus control inflation. Cryptocurrency removes the necessity for a trusted third-party intermediary such as a bank or other financial institution to complete transactions.
Since cryptocurrencies are not issued by any central authority, they cannot be directly controlled by any government or organisation. This is similar to how email works with no central server that stores messages sent over the internet. Once you send an email, it goes through multiple servers before reaching its destination. Similarly, when you send bitcoins to someone else, the transaction is broadcasted to all bitcoin nodes’ computers running bitcoin software which then verify it and record it.
Transactions Can’t Be Reversed
One of the main advantages is that it can’t be reversed by anyone. In traditional electronic payment networks, payment can be reversed even after many days have passed. The reason for this is quite simple: the person making the payment can claim they didn’t authorise the payment, and the bank will reverse it, no questions asked.
Why does this matter? Because if someone sends you a cryptocurrency and you don’t send it back, that person has no recourse. If you receive a payment in Bitcoin, for example, there is no way for the sender to reverse it. This means that in order for someone to steal from you, they would not only have to get access to your login credentials but also be able to meet certain security requirements that are designed to protect your account from unauthorised access.
This makes transactions involving cryptocurrencies virtually immune to fraud. Since there is no government authority backing cryptocurrency transactions, such transactions are very secure and cannot be tampered with by hackers or other malicious actors.
The fact that cryptocurrencies can’t be reversed also means that transaction fees are far lower than traditional electronic payments made via credit cards or PayPal.
Digital Currency Is Universal
Fiat money can’t be used anywhere in the world without changing it to the local currency. However, digital currency, including NFTs, is universal — you can use it anywhere in the world without needing to convert it. This is made possible by blockchain technology and cryptocurrencies that operate on a decentralised network, making it impossible for any government or agency to control them.
Digital Currency Has a Limited Supply
Inflation is one of the biggest issues traditional currencies face — governments can print more money whenever they want, and this devalues the existing currency in circulation. On the contrary, digital currencies are deflationary in nature and have a limited supply.
Cryptocurrency transactions are recorded on a blockchain, where miners verify them by solving complex mathematical puzzles. In exchange for their work, miners earn tokens as rewards. While fiat money is backed by government promises and central banks, cryptocurrencies are backed by code that controls their supply and distribution.
To conclude, cryptocurrency is not a fad. It is here to stay. With its multifaceted benefits, it will continue to grow as a technology and an asset. That said, cryptocurrency is still new and has a long way to go in terms of mass adoption. It will take some time before it becomes the go-to option for digital transactions.
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