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In the past decade or so, cryptocurrency has slowly but surely penetrated the market as a virtual alternative to traditional currencies. Digital money allows the transfer of funds between individuals and businesses without financial intermediation, which makes it among the most innovative entries of the 21st century. This currency has penetrated numerous markets, including that of gambling, where it can be used to access the free slots Cleopatra and many other games.
The growth in cryptocurrency popularity over the years has begged the question of whether it will replace conventional money. Some people view it as a threat due to its unregulated nature, which makes it a digital threat timebomb. On the other hand, it has helped solve issues in the financial system that traditional money could not. To understand whether digital money stands to replace the standard option, we have to assess the upsides and downsides it carries with it.
There is no denying that cryptocurrencies have profound benefits that have redefined the financial system. The solutions they provide are for nearly everything from truly significant transactions like asset transfers to something as simple as purchasing a car. Some prominent upsides include:
Options Variety
When cryptocurrency first began to boom in 2009, Bitcoin was the undisputed leader in the field. The currency, which was invented by Satoshi Nakamoto, was well accepted into the market and began to rack up value as time went by. By 2019, the financial market had taken notice of how well the currency was fairing and began churning alternatives to BTC. Today, there are more than 1200 digital money options circulating the market, such as:
Ethereum
Dogecoin
Ripple
Bitcoin Cash
Litecoin
Even though Bitcoin remains the most valuable of these currencies, the variety of options allows users to experiment with different digital currencies that suit their pockets and needs. Recently, Facebook released its blockchain cryptocurrency called Libra. It works with an open-source model that is backed by financial assets like a basket of currencies to avoid being volatile. This currency, alongside other options, is available and equally valuable to people in different countries, unlike regular money.
Peer-to-Peer Focus
Cryptocurrency functions purely on a peer-to-peer structure where users transfer funds directly to the intended party without the interference of an external authority. This cuts out the middle man concept found in traditional transfers where dealings have to go through agents, brokers, or legal representatives, which complicates what would otherwise be a straightforward transaction. The most significant upside of removing the middle man is giving back power to the people. The current social system disenfranchises individuals significantly, with corruption leading to rampant inflation. Digital money introduces an option that is free of such constraints and works on a system that is transparent while also being secure.
Confidentiality
Discretion is another factor that draws the masses to Bitcoin and other cryptocurrencies. Purchases are never associated with one’s identity unless there is a voluntary choice to publish their transactions. This system works very much like cash-only purchases that cannot be traced back to an individual, but over the comfort of the internet. This confidentiality is maintained through the generation of a new anonymous bitcoin address each time a purchase is made. Even though this does not eliminate the traceability of Bitcoin transactions, it makes it less possible to link to one’s identity. Traditional cash or credit systems, on the other hand, have reference documents that can easily be connected to a person, using IDs, addresses, and additional information.
Targets the Unbanked Population
Globally, more people have access to the internet that they do to banking and currency exchange systems. This makes it hard for those in such regions to establish credit and grown financially. Cryptocurrencies grant such underprivileged populations the chance to gain and exchange credit. Such wide accessibility is predicted to drive down the rates of poverty and corruption.
Smooth International Transactions
Even though not many jurisdictions count Bitcoin and other cryptocurrencies as legal tenders as of the moment, they can be used almost anywhere where there is internet access. Digital money is not subject to exchange, interest, and transaction rates that are applied to traditional options. The use of a blockchain system also eliminates the trouble of going through regular authorization channels that often cause delays in transactions.
Mobile Compatibility
Like with most modern services, mobile payments are possible using cryptocurrencies as long as there is a connection with the web. Therefore, one doesn’t have to leave the comfort of their location to pay for a service or product. Also, personal information is not required to complete the transactions on these gadgets, which maintains anonymity.
Despite the numerous upsides lauding the use of BTC and other digital currencies over traditional ones, they do have a few drawbacks. These downsides interfere with the mainstream adoption of the cash, and they include:
Cybersecurity concerns
Being digital technology, cryptocurrency platforms are always under the threat of cybersecurity concerns. In the past, some hackers have succeeded in breaking into the system and taking significant amounts of BTC, which saw its value take a dive that almost burst its growing bubble. One such attack cost ICOs close to 500 million dollars worth of Bitcoin, which saw many BTC holders surrender their coins. Such events fuel panic among the public and make the cryptos weak against the fiat currency.
Changing Perceived Value
The value of cryptos against the fiat currency is continuously changing due to their perceived value. For instance, BTC is built to support 21 million coins only, which makes it very much like gold. Once this limit is reached, no more coins can be mined. This makes it impossible to apply control on the currency like others where investments can be pumped into capital resources to keep inflation low. Therefore, it becomes too familiar for investors to buy and sell the coins according to how they stand against the fiat options.
A future where cryptocurrencies replace traditional money is highlighted with a lot of upsides, especially the fact that they are not as easily manipulated as fiat currencies. However, some significant challenges are going to keep them from outpacing regular options for a long time. The world will have to set up new infrastructure and adapt to them before a crypto-driven world is fulfilled. However, it is impossible to dismiss that it is a possibility that could come to fruition in the distant future.
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