It's widely regarded that cryptocurrency is a growing ecosystem that has slowly been making headways into the world's traditional financial systems. According to statistics, the number of users of various cryptocurrencies has grown by 66 million between 2018 and the last quarter of 2020. Furthermore, both private and public sectors are warming up to the idea of adopting cryptocurrencies in their financial dealings such as making payments, value storage, and as an investment.
The history of cryptocurrency goes back decades ago when cryptography started making digital advances. This is the technology that has helped develop and evolve the variety of encryption techniques that make cryptocurrency networks secure and reliable to take on different transactions. Now with over 5,000 cryptocurrencies and growing, look at these four reasons as to why cryptocurrency is the future of finance.
The Dawning Of Decentralized Finance (DeFi)
The need for transparent, secure, and accessible financial systems is said to be mounting and becoming more obvious. This is believed to be caused by the current centralized financial system's continued failure to provide financial freedom and credibility to users. Many see decentralized finance or DeFi as a system that can offer more transparency and better transactional security and replace some conventional financial processes soon.
DeFi is said to be quickly gaining traction in investing, trading, borrowing, and lending that catalyze a revolution in today's financial services. The increase in demand and accessibility of cryptocurrency exchanges are increasingly raising the popularity of different DeFi systems worldwide. Along with it, cryptocurrency exchanges have become well-known with investors too. These top crypto exchanges in Australia are some of the platforms Australian investors are progressively trading cryptocurrency with.
Therefore, cryptocurrency is believed to continue to push changes to financial systems as they're known today. As a result, the DeFi created on a public blockchain is becoming a more viable alternative financial system that offers more access to financial services. Anyone anywhere can connect to it while it also offers transparency.
Varied Values Of Cryptocurrency
While cryptocurrency doesn't have an intrinsic value, it holds value in the following ways:
- Payments: It can be used to make transactions such as buy goods or services without requiring a trusted third party to complete possible.
- Value Storage: Since the total supply of most cryptocurrencies is limited, the shortage influences their value.
- Stable coins: Cryptocurrency can be attached to commodities such as gold or oil or currencies, such as the USD.
- Privacy: The technology that cryptocurrency is built on security that can allow users and owners to remain anonymous during transactions.
- Digital Access and Ownership: Even people who have no access to traditional banks can enter the financial system with the help of cryptocurrency.
- Digital Gold: Cryptocurrencies and gold share attributes comparable to money. Both can be used as a medium of exchange, has a store of value, and possesses a unit of account.
More And More Actors Are Becoming Receptive
Cryptocurrency is believed to be increasingly becoming a more acceptable financial system. Both private and public sectors have shown great interest in it, and it's now openly recognized across many sectors. So far, there are public and private actors that have openly recognized cryptocurrency as part of their financial systems. Institutional investors, technology-focused corporations, and even national central banks all over the world have started to incorporate cryptocurrency in their operations.
Also, with its acceptability, new policies and regulations are being put in place to create regularized practices for the future. The policies are also being used to put all players in check as more players continue to break into space.
Transactional And Banking Benefits
As cryptocurrency use grows day by day, acceptability and accessibility continue to be put in the spotlight. The cryptographic technique and technology also keep evolving and advancing which leads to the creation of a better and stronger cryptocurrency financial system. Presently, these are the apparent benefits the system offers as a financial system.
- Privacy
It allows for anonymity while transacting as the system is powered by the use of different cryptographic techniques. These methods ensure data protection to avoid information falling into the wrong hands. All data transmitted is literally hidden from unauthorized persons.
- Security
Transactions carried out using cryptocurrency can't be changed or forged, and it's transmitted in extremely high-security networks. However, financial records can still be traced for proof.
- Access and efficiency
In a world where there's still a large population without access to formal financial services, cryptocurrency offers a viable and concrete solution.
Conventional banking is restrictive due to a lack of personal identification documents, account opening and operating funds, or proximity to an institution. People with no bank accounts worldwide can now tap into this financial model that offers instant access from anywhere, lower transaction costs, and fast processing of transactions.
Conclusion
The history of cryptocurrency is very telling on what stake it holds in the future of finance. Blockchain technology can potentially disrupt the conventional financial systems that currently require a trusted third party to check, verify and authorize transactions. As the technology develops, more sectors acknowledge and accept cryptocurrency as a viable financial system. Cryptocurrency could become the new conventional financial system in the future.
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Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.
