The idea behind cryptocurrencies was introduced at the end of the 1980s to develop a currency to be transmitted anonymously and free from centralized entities (i.e., banks).
What is cryptocurrency?
Cryptocurrency is a decentralized and highly encrypted digital exchange. It uses cryptography as a medium of exchange. It records transactions in a digital ledger called a blockchain through mining, which tracks the transactions of a cryptocurrency in a blockchain. Bitcoin (created by Satoshi Nakamoto) is a stand-alone digital currency that does not require the use of a bank to store or make transactions.
It is comparable to physical coins in that they have value and can be exchanged for services and goods online or as a kind of expanding investment. Bitcoin can be transferred from one wallet to another, whether on a cell phone, computer, or in the cloud. Bitcoin is resistant to forgery. It is helpful to ask the question: what exactly is blockchain? The blockchain is the technology behind “Bitcoin” and was created specifically to create the first completely online virtual currency.
Blockchain is a method of storing data implemented by a set of technologies, including distributed computers, allowing it to exist globally without needing a central authority. In this model, computers collaborate to reach an agreement to securely validate each transaction. Blockchain is valuable because the technology makes it immutable, unchangeable, and “untrusted.” Meaning there is no central authority, and the blockchain is the authority.
The characteristics of cryptocurrencies
- Decentralization: No central bank, state, or government can control a cryptocurrency.
- Anonymity: It is possible to buy and sell cryptocurrencies anonymously.
- No intermediaries: Cryptocurrency transactions are carried out directly from person to person and do not require intermediaries, banks, or organizations.
- Speed of transactions: Sending cryptocurrencies to another person takes only a few seconds to a few minutes. The process is, therefore, much faster than the money transfers that financial institutions such as banks allow, which can take up to several days.
- A voluntary use: A cryptocurrency is voluntary and not made compulsory, unlike traditional currencies like the Euro, which is the reference currency used by all within the European Union.
Cryptocurrencies are revolutionary currencies with many advantages compared to the fiat currencies of banks. The significant advantage is that no institution is behind a cryptocurrency, and nobody can control it. When it comes to euros or dollars, governments determine the value of these currencies and try to control them through currency issues, so banks create currencies artificially.
When it comes to cryptocurrencies, their value depends on several factors. Partly on supply and demand, the amount of electricity needed to secure the currency on the blockchain (mining), and the level of difficulty in mining the cryptocurrency. Also, the influence of the media, investors, and the project or innovation to which this cryptocurrency is linked.
Cryptocurrencies can be used to buy goods and services or to transfer money between people. They are also volatile instruments that are highly subject to speculation and on which traders bet up or down to profit from their price movements and generate profits. Anyone can therefore invest in cryptocurrencies through a cryptocurrency exchange.
Could cryptocurrency replace the dollar in the future?
According to studies, there is an explosion in the number of users of virtual currencies at the moment. During its creation, bitcoin convinced only a few hundred users. But very quickly, it gained popularity and acquired a wider audience. Since this kind of currency was created, the number of seduced people has kept growing.
According to recent studies, 295 million users worldwide were counted on December 29, 2021. Thus, it has been observed that many people are more interested in virtual money. But the craze for the use of these currencies will continue. If the growth curve increases further. By the end of 2022, the milestone of one billion users will undoubtedly be passed.
- Multiplication of virtual currencies.
If the number of users is rising sharply, it is mainly because the number of virtual money is too. In 2013, Ethereum, the first competitor to BTC, was born. It is not the only one; it will be followed by many other virtual currencies. Their gradual appearance will make more than 9,000 virtual currencies available in May 2022.
It is worth noting that although there are multiple cryptocurrencies, it is only about ten of them enjoy notoriety in the eyes of the public. This number is still multiplying, but bitcoin remains the original virtual currency. Besides bitcoin (BTC) and Ethereum (ETH), Tether (USDT), BNB (BNB), USD Coin (USDC), XRP (XRP), and Cardano (ADA) are also very popular. Users have a wide choice to fill out their e-wallets.
- The currencies of the future
There is no way around it; cryptocurrencies are in the global monetary landscape. Before long, every country in the world will accept their use. Financial institutions are often criticized for the slow process but also for some blockages. With virtual currency, companies can instantly make affordable transactions without border limitations.
It is known that financial intermediaries charge their services at a sometimes exorbitant price. Cryptocurrency can provide the same mission with lower fees. Moreover, with the principle of blockchain, the operations are secure. We can thus deduce that cryptocurrencies will be the currencies of the future.
