Cryptocurrencies have been discussed and spoken about for a long time but are now emerging as financial assets that are more accessible and useful. Cryptocurrencies have the capacity to facilitate more convenient access to capital and financial services, which can allow social and economic growth in developing countries. The impacts of cryptocurrency in financial markets are staggering. But before going any further, we first need to know a little more about what it is.
So what is cryptocurrency?
It is a decentralized virtual currency with some brutal benefits. It is secured by cryptography — and this is where the name comes into play. It exists outside the hands of any government and central authorities, meaning that it is far away from being manipulated by central authorities. It’s known for its inflation resistance and its transparency and portability, however, the main problem with this currency is that its exchange rate fluctuates fast.
Why should you be bothered about it?
To be frank, the usage of cryptocurrencies over various centralized currencies provides several benefits (for example, frictionless transfers and inflation control). Multiple investors attach such currencies to their broad portfolios as there are certain advantages of cryptocurrency out there indeed. The presence of an alternative asset like cryptocurrency can combat the attempts of a government to maintain its own centrally managed currency or to control public assets in times of economic difficulties. The most significant distinction is that they are safer for citizens to work with and can be used for transactions like buying gold. One of the many reasons to go after cryptocurrency is that it eliminates the middleman when it comes to transactions — this is a huge advantage for investors.
Before jumping on to the main topic that is its effects on the economy and the impact of cryptocurrency on business, let us see some of its aspects first!
There are some fundamental aspects of cryptocurrencies which turn out to be more of like advantages of cryptocurrency that eventually steal the spotlight, and they are:
- Cryptocurrencies are decentralized. What does it mean? It means it is fault-tolerant. Decentralized systems are less vulnerable to unintended errors because they depend on separate part networks.
It is attack resistant. The expense of disrupting, damaging, or exploiting decentralized structures is higher since they don’t have weak focal points that can be targeted much lower than the surrounding network.
It is collusion resistant. Decentralized network participants consider it difficult to behave in ways that are to their benefit at the detriment of others. On the other side, government corporations work in ways that favor themselves almost also harm others.
Many dissertations on cryptocurrency give stress on these facts as these are crucial.
- Cryptocurrencies are trustless. Until bitcoin came into existence, any kind of currency needed a central authority you had to trust in order to use it. This supreme authority in all situations is the fundamental flaw contributing to the currency’s downfall.
Each portion of the network validates what the other pieces claim without anybody having to trust. If you make a bitcoin transaction, all nodes must receive the transaction and verify whether the signatures are correct or not. When the signatures are not proper, the contract gets rejected. It is one of the positive effects of bitcoin.
- Cryptocurrencies are “Immutable.” “Immutable” implies that it “can not be reversed” in the clearest context.
Immutability in the field of cryptocurrencies and blockchain follow three principles:
A) Someone other than the owner of a private key will not be able to transfer capital.
B) It would be extremely uncommon or impossible for history to be rewritten.
C) On the blockchain, all transactions are registered.
What does bitcoin mean for the economy?
Coming back to the main topic or the question, what are the results of this on the economy? Cryptocurrencies have the ability to accelerate global social and economic development by making it simpler to access when it comes to buying resources and availing financial services, particularly in developing countries. The transparency of transactions has increased. When the process becomes automated and digitized for blockchain and cryptocurrency, everything gets monitored. The best thing is that neither individuals nor corporations can exploit it, which significantly reduces the possibility of coercion and fraud. This implies that less-developed countries have more chances of engaging in financial markets and of raising their own economic and social status. People can monitor where policy funds are to be guided and thereby have a say over their policies, and this is one of the reasons behind the uses of cryptocurrency. One factor to look at is that it has allowed entrepreneurs more control. There was no better time for businesses than now in the way that cryptocurrency and blockchain technologies might help companies access more capital. BitPesa is one of the companies in Africa that supports business owners with European, American, and Asian companies to make financial transactions. The reason was to promote the advancement of investment and a healthier commercial partnership with the rest of the world across both small and medium enterprises. Businesses can now rapidly convert altcoins into fiat currencies by using the digital wallet of BitPesa and TenX that they can then transfer to commercial investments, shopping, and payments.
All of these are ending up in term of a beneficial rise in economic activities.
A whole industry has already been developed around cryptocurrencies and is controlled by institutions that oversee all the world-wide digital coin exchanges. People in business who were rich immediately saw opportunities like this to expand financially. They got a chance to grab the pace at which the cryptocurrency business grew. So if someone asks from now on, what are the positive impacts of cryptocurrency? Tell them these facts.
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Cryptocurrency and Its Effect on World Economy was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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