To the uninitiated, cryptocurrency may sound shady and unreliable, like a mafia hacking operation in the bowels of the Internet. But in recent years, cryptocurrency has gained so much attention. In fact, it has become reported side by side updates on the traditional stock market in reputable newspapers, making this new currency more or less legitimate. While cryptocurrency is not spared from scams, its users also swear by the innumerable benefits that come with this type of currency. So, why do people use cryptocurrency?
Five Key Characteristics Of Cryptocurrencies
Cryptocurrency, for starters, refers to all-digital, encrypted currencies belonging to a decentralized cash system. It is not governed by any central bank or any government but is instead managed by a computer network of nodes. Nodes are users’ computers, which are units that make up a blockchain. A blockchain, on the other hand, is a digital record of transactions online. Cryptocurrency then is a financial blockchain-based platform.
Let us examine the key characteristics of cryptocurrencies, and later, find out why do people use cryptocurrency.
- Cryptocurrencies are only found online. These types of currencies then are only accessible online or on the internet using a computer or a smartphone and do not have a physical bill unless you convert cryptocurrency into cold cash. Since cryptocurrencies are digital, they are also stored in digital wallets, which users can access.
- Cryptocurrencies are regulated by peer-to-peer networks instead of an institution like a central bank. Since there is no government interference, the transactions are not very bureaucratic and are therefore more efficient. Fraudulent cases are also limited because each transaction that takes place is transparently recorded in a public ledger that is accessible to everyone in the blockchain.
- Cryptocurrencies use encryption to verify transactions. Through encryption, data is converted into a code that cannot be read unless one has the keys to decode it. Cryptocurrency and encryption then owe their etymology to cryptography, the process of translating language or information into a secret code. Encryption then ensures that cryptocurrency transactions are secure, anonymous, and decentralized.
- With cryptocurrency, there is a record or paper trail of all transactions. Cryptocurrency transactions are transparently recorded in, as mentioned above, a publicly available ledger. Most importantly, these records are permanent and cannot be altered.
- You have the option to do transactions anonymously. The encrypted codes are not easily accessible to everyone.
What Are Reasons Why People Use Cryptocurrency
People are becoming more friendly towards cryptocurrency because the benefits far outweigh the risks. Investing in cryptocurrency is profitable on many fronts and even allows for quicker returns than investing in traditional stocks and financial instruments. Some of the benefits of cryptocurrency include the following:
- Easy payment tracing. All thanks to blockchain technology, you are able to track the payments that you made, as well as all your transactions in real-time. You won’t have to wait for another party to process transaction statements or records and receive a copy after a day or two. You can then cross-check transactions with either the recipient of your payment or the sender of your payment.
- Convenient management of transactions. Aside from easy tracking, you are on top of your transactions, knowing well where your funds go. You are then assured that your funds do not go elsewhere unsupervised or used and channeled somewhere without your knowledge and consent. This way, the risk of fraudulent transactions is lessened.
- User privacy and anonymity. There are cryptocurrencies that assure you of anonymity in your transactions from start to finish. With Monero, for example, you won’t have a way of knowing the amount going around between and among crypto users in the network, nor would you know who they are. Unlike Bitcoin, where transaction details like the number of Bitcoins are exchanged between and among users.
- Quick transaction turn-around time. If you are pressed for time, cryptocurrency transactions will not pose any problems because they are processed at a moment’s notice. When you are an online seller with cryptocurrency payment options, you will find crypto very beneficial because the quick turn-around processing time also means the payments are credited to your account in an instant.
- Efficient international transactions. Without leaving the comforts of your room, you may send funds to any country in just seconds. Transactions are also transparently recorded.
- Minimal transaction fees. Since cryptocurrencies do not need to be stored physically, no costs are incurred for storage and similar logistics. The minimal transaction fees are also possible because of the cryptocurrency’s decentralized system, independent of any central bank. Find out more why do people use cryptocurrency.
Of course, this doesn’t come without a caveat. So much about the internet has yet to be policed and regulated, and so does cryptocurrency. But cryptocurrency will not die down like a fad just yet. It is very much possible to see cryptocurrency as the highly favored transaction method in the next century because of its potential in abating fraud.
In fact, some of the biggest banks in the industry are testing the crypto waters and even coming up with their own cryptocurrency. For one, there’s Bank of America. This development presents a ray of hope that the crypto world could be influenced, cleaned up, and refined by the rigors of corporate governance. Widespread use would also invite more conversation around it to see how it can be further used for the common good.
There may come a time, too, when our questions won’t be so much about why people use cryptocurrency. Who knows, we might be scratching our heads and wondering why others haven’t embraced it just yet.