Cryptocurrencies are virtual currencies that use an encryption known as Cryptograph to generate money. They are made up of codes that can be used to verify transactions. Every digital currency has its own distinct value just like other mediums of exchange including the Great Britain pounds, US dollars, and Euro. However, as opposed to these mediums of exchange, cryptocurrencies uses encrypted details to complete transactions between parties. The transactions usually include the exchange of digital tokens at a specified market rate for other currencies, either digital or otherwise.
There are over 800 cryptocurrencies including Bitcoin, Litecoin, Dashcoin, Ethereum, Tripple, Monero, and Steem. Many others are being developed on a daily basis. Cryptocurrencies have eliminated many issues that were encountered before its invention. For instance, with the invention of cryptocurrencies, parties to a transaction can now complete deals electronically without employing the services of intermediaries thus removing the need to spend more by paying for the services of the third party. This was made possible by the introduction of public key cryptography and blockchain, which functions to store data of the transactions that are completed by various parties in the Bitcoin economy.
This data can be used to resolve disputes that may arise in a long run. Although many individuals are still not comfortable trading and making payments with cryptocurrencies, its importance cannot be overemphasized. This post will highlight a few importance of digital currencies. First, it is important to state that just like any other currency, digital currencies serve as a medium of exchange, a store of value and a measure of value. Here are some other importance of digital currencies:
Security And Transparency
Cryptocurrencies provide more secured and trusted way to complete transactions. For instance, The bitcoin blockchain is not operated by a central authority like other online cash systems. The possibility of cheating is completely eliminated as it is a public data distributed in a peer to peer method across several nodes in the network. In addition, since the currencies are digital, they are not easily counterfeited and a transaction cannot be reversed by a whimsical party.
Independence And Anonymity
Transactions involving cryptocurrencies are usually completed in a decentralized manner, which invariably means that there is no need to provide banking details or involve any governmental institution. Digital currencies allow transactions to be completed in a more independent way compared to the traditional currencies. As already mentioned above, cryptocurrencies cut out the need for intermediaries thereby protecting parties from the exchange and capital controls as well as encourages low-cost banking. It also makes it easy for individuals who prefer anonymity and nondisclosure to complete transactions without disclosing their real identity or other vital information. Since the currencies are digital, the locations of the parties to the transaction are also not relevant.
No Room For Identity Theft
Cryptocurrency allows users to send only the detail he/she wants a receiver to have, with no additional information with its push mechanism. This helps to protect the information of the sender from being stolen or abused, unlike credit and debit cards where the card details are sent to the merchant.
Reduced Cost
Cryptocurrencies allow its users to pay less for shipments sent abroad. This is because trading and making payments using cryptocurrencies allow remittances between countries thereby enabling reduced rates compared to transactions involving the traditional currency. Furthermore, there is usually no transaction fees for the exchange of cryptocurrency as the miners are already compensated by the network. Cryptocurrency users incur no extra fees when paying for goods at international and local e-commerce stores.
Complete International Transactions Easily
Cryptocurrency users can complete international transactions with much ease. This is because the currency is virtual and can be easily transferred from one country to another compared to the traditional currencies. Getting started with cryptocurrency is also easier and involves some few online processes to create a secured wallet. You can deposit and withdraw funds from your wallet at will.
Full Account Ownership
Unlike accounts with most electronic cash system, that are managed by the company in question, you are in full control of your cryptocurrency wallet, private key and public key.
In conclusion, cryptocurrencies function to complement the existing services offered by traditional currencies. They are rapidly growing in usage and acceptance. Many digital currency enthusiasts believe that the best is yet to come in the cryptocurrency industry.