Twenty years ago, when the commercial Internet took off, the question came up whether or not digitalization would ultimately render central banks and ordinary money obsolete. With the rise of cryptocurrency, these questions have come back with renewed force.
For now, cryptocurrencies are not yet in a position to impact global economies and financial systems, let alone displace fiat currencies altogether. Crypto does not yet enjoy the same degree of consumer trust and it is still too volatile to act as a reliable means of payment or unit of account.
But innovation in the crypto space continues unabated and considering the inherent benefits that crypto offers, the future of this asset class is promising.
But what is so unique about cryptocurrency? What are the benefits?
1. Peer-to-peer Transactions
It’s one thing to pay someone in cash – but as soon as you pay with a credit card, an app, or conduct a bank transfer, even if it’s fast, your transactions are handled by middlemen.
Crypto transactions are peer-to-peer, money flows directly from one wallet to another. This makes for a clearer audit trail, greater accountability, and it’s cheaper.
2. High degree of Privacy
Every conventional transaction you make is recorded on ledgers maintained by banks. This ledger includes your account balance, name, shows the source of your income, what you buy and who you pay.
Cryptocurrency allows for a high degree of privacy. Although transactions are recorded on public ledgers, showing wallet addresses, transaction amounts, fees paid, and the time and date, your identity is not disclosed. This protects you from identity theft and similar risks that you’re exposed to under the traditional system.
3. Low or no Fees
Whenever you send money overseas, whether by bank or through a remittance agency, or whenever you use your credit card, transaction fees can take a significant bite out of your assets.
Because miners that validate transactions on the blockchain usually receive their compensation from the network itself, transaction fees are often very low – sometimes they don’t apply at all. Generally speaking, sending cryptocurrency around the world is as cheap as it can get.
4. Access to capital
You’d be surprised to know that there are around 2 billion people that do not have a bank account, and in this world, if you don’t have a bank account, you can’t really participate in global financial markets.
Cryptocurrency is like digital cash. If you have access to the Internet, then you have access to cryptocurrency. You can buy crypto through bank transfers, make use of specialized over-the -counter crypto services, or simply exchange cash for crypto with a friend. Cryptocurrency gives you access to capital.
5. No foreign exchange rates
When you send money abroad, it’s not just expensive because of the fees charged by the service provider. It’s also expensive because of the exchange rate.
Cryptocurrency is not subject to exchange rates, interest rates, significant transaction charges, or other levies imposed by countries and central banks. Because it’s peer-to-peer and not linked to any particular fiat currency, sending cryptocurrency to another country is as easy as sending an email.
6. True ownership
Although the money in your bank is your money, it is not completely under your control. Assets can be confiscated, frozen, lost, or stolen.
When you hold cryptocurrency in your own wallet – whether that’s in a hot wallet or in a cold wallet – the money is yours and only yours. And since you are the only one who holds the private keys, you are the only one who can control what will happen to your money.
There are currently more than 2200 different cryptocurrencies in circulation worldwide. Many of these coins have been created for very specific use cases – for payments, to vote, to create apps, to reward content, and so forth. This shows just how flexible the cryptocurrency phenomenon is.
8. Strong security
Once you’ve transferred crypto to someone else and it has been validated on the blockchain, the transaction cannot be reversed. Money on the blockchain cannot move without the owner of the coins – the one who holds the private key – signing off on a transaction.
The strong encryption techniques employed on the blockchain guard against fraud and account tampering and protect your funds, almost perfectly.