Originally just a fringe financial tech concept, cryptocurrency has become more and more popular over the last few years. Bitcoin is the biggest of them, but more are being created with many governments permitting the use of cryptocurrencies but regulating it due to the decentralized nature of transactions. Here we will take a look at the positives and negatives of cryptocurrencies becoming a real-world dollar.
What is Cryptocurrency and why is it so popular?
Cryptocurrency is a digital way of making transactions between people who have virtual wallets. This is done without the need for a trusted third party and blockchains are used to store any transactions securely and anonymously. The ease of transactions over a decentralized system is the main reason for its popularity. It means you can transfer to anyone with a virtual wallet anywhere in the world without encountering extra fees from banks.
What are the dangers of cryptocurrency?
The main problem with cryptocurrencies is that their value can wildly fluctuate over any period. For example, Bitcoin hit a peak in 2021 and made many holders instant digital millionaires but not long after, the value went back down. The value of cryptocurrencies is based on the faith the holders of them have. Recently, Elon Musk said Tesla will no longer accept Bitcoin and the value of the bitcoin dollar fell straight away. Central banks around the world have considered introducing a Central Bank Digital Currency (CBDC) for speedier transactions and fewer risks than other cryptocurrencies. This could cause economic issues down the line, however, as it may be implemented in a way that cuts out local banks that provide services such as loans and mortgages to keep the economy going. The other problem is the cryptocurrency system can be exploited and used anonymously by terrorist groups and other criminals, making them hard to track.
What are the positives of Cryptocurrency?
It can be said that if you purchase cryptocurrency you need to do it at the right time. Back in 2010, a man bought 2 pizzas for 10,000 Bitcoin (around $30 at the time), which would now be worth nearly $400 million. So, for example, just like it’s wise to keep an eye on NRL odds or horseracing odds when you’re hedging your bets, the same thing needs to be done with cryptocurrency fluctuations in the market, upcoming announcements and any other conditions which would impact its value. This is important because another positive is that, unlike banks, the cryptocurrency market is always open and you can make transactions anywhere, anytime.
Becoming a real-world dollar
Cryptocurrency will continue to rise in popularity around the world, with some countries like El Salvador in Central America making it legal tender. Stablecoin is a form of cryptocurrency where its value is fixed and backed by another real-world asset such as the US dollar. This is one reason why cryptocurrencies such as Stablecoin Tether will not overtake the US dollar as it is reliant on it for its value. Bitcoin is also popular in poorer countries of the world that have a weak currency, again to the decentralized nature of transactions, meaning their local currency worth is irrelevant if they are buying with Bitcoin. In the long run, cryptocurrency is here to stay as technology progresses and new developments occur, so will the ease of using cryptocurrency.
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