The Future of Smart Money: How Cryptocurrency Could Revolutionize the Economy
What if you could store your money in any currency you wanted without worrying about exchange rates? What if the financial system didn’t charge you exorbitant transaction fees or interest on your credit cards? What if the government couldn’t track your spending and siphon away your wealth with income taxes? Cryptocurrency could make all of these things possible.
Will cryptocurrency be the future of smart money and an all-around better way to handle financial transactions, or will it fall flat on its face? We will explore these questions and more in this post on how cryptocurrency could revolutionize the economy.
What are cryptocurrencies?
A cryptocurrency (or crypto currency) is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units.
Unlike fiat currencies, cryptocurrencies are not issued by any central authority. Instead, cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems.
Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. Digital currency can be used in many different ways such as online shopping, paying bills, buying goods and services online, etc.
Cryptocurrencies are considered an offshoot of traditional fiat currencies because they use encryption techniques to regulate the generation of units of currency and verify transactions on a blockchain.
In some cases, they are created through a process known as mining, which requires powerful computers to solve complex algorithms that validate information stored on their respective blockchains. This process results in new coins being added to an existing blockchain or creating an entirely new blockchain.
What makes them so revolutionary?
Cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems.
The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.
Each transaction stores details including but not limited to: time, amount, sender/recipient identification, and other fields.
These entries are verified by network nodes via cryptography and recorded in a publicly distributed ledger called a blockchain.
Once recorded, data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which needs a collusion of the network majority.
Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. They maintain long-term integrity due to robust hash function security and proof-of-work consensus mechanisms.
Exchanging fiat for cryptocurrencies
If you are looking to exchange your fiat currencies like dollars, euros, yen, pounds, etc., or cryptocurrency, use a service like Coinbase.
The San Francisco-based company has been at it since 2012 and is worth an estimated $1.6 billion.
And while they don’t offer Bitcoin Cash (BCH) trading on their platform just yet, they do offer Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash ABC (BCHABC).
For investors who want to trade in cryptocurrencies but avoid traditional exchanges for philosophical or regulatory reasons, Coinbase offers a simple way to dip their toes into these new markets.
Buying a cup of coffee with digital coins
Cryptocurrencies, like Bitcoin and Ethereum, are becoming more and more popular. Both as a means to buy goods and services and as an investment.
More businesses are accepting cryptocurrency payments each day. In fact, you can use digital coins to buy a cup of coffee at select Starbucks locations in Seattle now (you just have to flash your phone at checkout).
If it sounds futuristic, that is because it is. But cryptocurrencies could transform how money is used across borders.
Here is why in many countries, individuals pay exorbitant transaction fees when they send money overseas. These fees make sending small amounts of money nearly impossible.
With cryptocurrency, however, cross-border transactions become much cheaper and faster than with traditional currency methods.
Disrupting the business world with crypto-payments
With more businesses, organizations and individuals accepting cryptocurrency as payment, it is easy to imagine a future where cash or credit cards aren’t even needed.
Peer-to-peer payments between anyone, anywhere in the world could be instant and frictionless. International transactions would be fast and cheap.
Merchants would find it easier to accept payments from abroad without having to worry about currency fluctuations.
And for travelers, paying for goods and services with cryptocurrency would make travel more convenient than ever before.
Investing in cryptocurrencies
The biggest cryptocurrency player by far is bitcoin, which currently has a market value in excess of $10 billion. It is followed by Ethereum and Ripple with respective values of $1.2 billion and $878 million.
Investing in cryptocurrencies can be lucrative, but it is also extremely risky. For example:
- You can lose money by investing in cryptocurrencies.
- Prices of cryptocurrencies are highly volatile and you may gain or lose money over time.
- Crypto markets are largely unregulated and decentralized, meaning that you have little recourse for recovering your funds if something goes wrong.
While some companies allow you to exchange fiat currencies for cryptocurrencies, there is no guarantee that exchanges will continue to be available in all countries, or to everyone.
If you want to invest in cryptocurrency, keep in mind that it may not be legal to do so depending on where you live. Make sure you understand all of your country’s laws before investing.
Though there is room for skepticism, it’s hard to deny that cryptocurrency has a good chance at becoming a vital part of our economic system. If you want to better understand how blockchain and cryptocurrency can improve your life, we suggest diving into some further reading on these topics.