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With the never ending discussions around crypto, investing, and day trading, we often fail to think of crypto’s original design and intention. Crypto originally started out as a unicorn idea that truly had no traction or support.
Remember that in 2011, Bitcoin was still worth well under $1 per coin.
So putting aside the investment component of cryptocurrencies, why does crypto matter? How is it truly better than fiat currency? Is it here to stay and will it replace the dollar as the global powerhouse of currencies? There are many benefits to crypto, so I ventured to simplify them for you.
One of the unique benefits of cryptocurrencies is that they allow for enhanced transaction speeds and the eradication of “middlemen” financial management agencies.
When you send money to a friend, through Venmo for example, it often requires 1–3 business days for that transaction to process.
If you want to send that money immediately, you pay an extra fee for the cost these financial institutions bear to expedite this process. Cryptocurrencies largely eliminate this problem.
Cryptocurrencies allow you to almost instantaneously send money from one person to the next. No third party management. Depending on the cryptocurrency, these transaction speeds vary, but most cryptocurrency transactions can take place in under ten minutes.
Ten minutes sounds a lot better than 1–3 business days. Besides, we all know that 1–3 business days really means three business days.
This will have undoubtedly positive impacts on our supply chain and the ability of global supply to meet demand.
Cryptocurrency acts like WD-40 to a rusted bike wheel.
Cryptocurrencies offer superb versatility. What I mean by this is that there are thousands among thousands of cryptocurrency projects that all serve unique purposes and present distinct advantages.
While it’s highly unlikely that every cryptocurrency will maintain relevance in the event that cryptocurrencies experience global adoption, there is a certain allure of this promise.
Take Bitcoin as an example. While Bitcoin is the founding father and king of all cryptocurrencies, there are several other coins and projects that are emerging to create even more rapid and efficient transaction speeds.
Litecoin is one such coin.
There are a variety of other unique projects that further demonstrate this versatility. Stellar Lumens is a protocol that will allow for cross-border (international) monetary exchange. Going back to the whole “middleman problem”, Stellar Lumens hypothetically eradicates this problem all on its own.
There are thousands of projects and coins that each geared towards a niche benefit or improvement in the industry.
Even more enticing, most of these cryptocurrencies can be converted into other coins. Meaning you could easily convert $200 of Bitcoin into $200 of Stellar Lumens (or other coins). You can do this as we speak.
Conversion between fiat currencies like the dollar and the euro are far more time-consuming, confusing, and generally complicated. Cryptocurrency conversions are quick and painless. They do currently require small fees depending on the types of coins, but this will likely be reduced if widespread adoption takes place.
This might seem confusing. You’ve likely heard of the relentless crypto hacks and scammers. There is wholehearted and undeniable truth in this. Many hackers have successfully hacked large institutions with massive cryptocurrency reserves.
But that’s the catch. These companies are getting hacked and having their crypto stolen. Cryptocurrencies and the underlying blockchains are almost impenetrable by design, and are the most secure form of currencies available. I know, I said blockchain. Did I lose you? Let’s break this down.
When a large company gets hacked for cryptocurrency ransom, the crypto itself is not getting hacked into. The company’s security protocols are being breached, and crypto is being stolen as a result.
If you maintain your own safe cryptocurrency storage habits (like an offline or “cold” wallet), it’s near to impossible to have your crypto stolen. If you keep your crypto with a large and most importantly online company, your crypto is always at risk.
Most cryptocurrencies rely on blockchain technology to record and verify every transaction ever made. Every transaction you make (primarily buying and selling) is recorded on that specific cryptocurrency’s native blockchain.
Think of literally blocks, like legos, connecting to one another, all in the same place. Because every transaction has been recorded, there’s virtually almost no way a hacker can successfully “steal” your crypto without the blockchain technology recognizing this as abnormal. Almost because nothing is technically impossible.
Very simply put, a hacker stealing your secure crypto is like “breaking the blockchain”. Remember, legos are hard to break. Especially when pieces are missing or in the wrong place.
It’s also why crypto can’t be “double counted”. It’s easiest to think of this like fiat currency. If I give you a dollar, I no longer own that dollar and you now have one more dollar. Simple for a reason.
Blockchain technology allows crypto to function in the same way, just with added security, transaction speed, and versatility.
If someone asked you if you wanted a scoop of vanilla ice cream in a cup or a triple chocolate fudge sundae, which would you choose. Unless you don’t like sundae’s, cryptocurrency is that triple chocolate fudge sundae.
This is certainly subject to your preferences and favorability towards the government. I am in now way trying to belittle or undermine the government’s initiatives (although I candidly admit that a certain level of belittling is appropriate in this day and age).
Cryptocurrencies by nature are decentralized. Getting real technical, if someone owns 51% of select types of cryptocurrencies they could leverage their position and make some pretty “centralized” moves. This is near to impossible. No one will truly ever own at least 51% of a select type of cryptocurrency, especially one that is a governance token.
Many cryptocurrencies are “governance tokens”, meaning they allow owners voting rights and power (based on number of coins and proportional to the value you maintain). This gives you voting power on proposals, changes, and future plans of said cryptocurrency or related projects.
In theory, this is great news and is essentially the democratization of currency.
Right now, the Federal Reserve (among several other government institutions) decides monetary policy and largely controls inflation, money supply, and taxpayer revenue allocations.
As citizens we have very little if not any control over what our taxpayer dollars are used for and what monetary policy the government should pursue.
We can vote for political candidates, but we all know how that goes. Thanks lobbying.
Because cryptocurrencies are decentralized, by nature there’s no “central authority” that controls the currency. This hypothetically will allow for a more liberalized and democratized economy that is truly guided by Adam Smith’s “invisible hand”.
If you don’t know who that is, take Econ 101 in your spare time.
Don’t get me wrong, the democratization of currency certainly wouldn’t be perfect and would present many complex issues. But, provided the prolific number of benefits created by cryptocurrency, it’s an intriguing risk to take.
Cryptocurrencies are not a perfect currency. No such thing exists. Like fiat money, cryptocurrencies are not tied to a tangible asset worth value (think materials like gold, silver, copper, etc.)
The irony is that we decide the value of those materials in the first place. With what you ask? The dollar. Which is a currency that we arbitrarily decided was worth something. You see the infinite loop now?
While cryptocurrencies won’t be the panacea of currency, there likely will never be one. But the immense benefits of transaction speeds, elimination of “middlemen” financial institutions and supply chain depressurization, versatility, and decentralization are all extremely promising and enticing.
No system will ever be perfect. But we can strive to reach as close to perfection as possible.
Cryptocurrencies have that potential.
If you haven’t already begun investment in cryptocurrencies, I highly suggest you do so. Check out my article on how to invest in crypto.
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