Making the movement of money more accessible, faster, and more transparent can help to increase trade and commerce on a global scale. Platforms like BITCOIN CIRCUIT 360 offer numerous trading options and help you start the bitcoin trading journey without any dedicated training. In addition, cryptocurrencies can potentially solve the problem of trust and information asymmetry because of how cryptography can be used to keep transactions pseudonymous and secure.
It means that for each transaction a cryptocurrency exchange facilitates, it does not have to store all the personal data about its users on a central database. While it is true that cryptocurrencies are alleged for illicit transactions like money laundering and criminal activities, they are also commonplace in fiat currency. The critical difference is that cryptocurrencies are non-physical by design, making them harder to track; banks are obliged to report suspicious activity.
The focus of cryptocurrencies is not to be anonymous but rather to make transactions secure and eliminate the need for the middleman, usually banks. The number of cryptocurrencies has increased from 40 in 2013 to 6000 today, with more than 80% of the market capitalization coming from the top 15 cryptocurrencies. As a result, new cryptocurrencies will have to work harder to compete against them.
Cryptocurrency advocates prefer that more adoption happens in countries with weak governments or unstable economies, as there is a chance for a new currency to take hold. But, first, let’s discuss problems cryptocurrencies can solve in present economics.
1. Cryptocurrencies can resolve issues related to inflation:
Most cryptocurrencies are deflationary by design, and now, only a few can create new units. It means that while they create new units, they also negate existing ones. Cryptocurrencies, in this sense, are not inflationary because they reject the idea of creating more currency and monetizing because different developers created all previous ones.
Gold is an example of an asset with this property, as it does not create more gold as its value increases; instead, it debases the last gold coins and bars. Cryptocurrencies, on their part, have anti-inflationary properties, which means that if a new cryptocurrency is created, then its value will go up from zero because a new unit is introduced into the system.
2. Blockchain can mitigate corruption:
The concept of decentralization means that the ledger is not stored in one place but on thousands of computers worldwide. A single entity cannot corrupt and change the blockchain ledger for its benefit. This technology can have a use case to record land ownership and property rights, which is helpful in cases where governments suffer from corruption and may tamper with information related to who owns what. It has been implemented in some cases worldwide but still requires a consensus among relevant parties before it can be fully adopted.
3. Cryptocurrencies can reduce remittance fees:
People from developing nations who decide to leave their country and relocate to better economic opportunities will have to pay various fees, including currency conversion and remittance fees. Some of these countries receive billions of dollars in remittances every year.
Cryptocurrencies solve this problem by trying to eliminate the need for a third party like banks or other financial institutions. The idea behind cryptocurrencies is that there does not need to be a middleman for any transaction. However, remittance fees are charged because people have no other option but to use banks or other financial institutions as intermediaries for foreign transactions; this makes cross-border payments expensive.
4. Cryptocurrency can solve the problem of counterfeit money:
Counterfeit money is a global problem; in 2013, the FBI estimated at least $61 million in counterfeit bills around the United States. Cryptocurrencies do not have this problem as each new unit created has a unique cryptographic hash that no one can change for the life of the currency. Cryptocurrency, in this sense, is more secure and efficient than regular fiat currencies, which can be counterfeited by simply printing more money or using polymer notes.
5. Cryptocurrencies can make financial regulation more transparent:
While existing regulations are designed to fight against money laundering and the financing of terrorist organizations, cryptocurrency regulations are relatively new and still need to be implemented. The idea behind a blockchain ledger is that information is fully transparent, meaning governments can track where every single unit of a specific cryptocurrency went in every transaction. As a result, it will make it easier for them to identify illegal activities like illicit drug trafficking and terrorism financing.
Either as a payment method or through smart contracts, blockchain applications are being discovered every day with the potential to disrupt different industries.