It’s hard to find a person who has never heard of cryptocurrencies, as they have become the talk of the Internet during past years. The industry is still in its infancy – its history commenced in 2009, when Satoshi Nakamoto released the whitepaper of Bitcoin. But it is already on its way to being accepted everywhere, even on the governmental level.
Can we consider crypto as the future of the entire financial industry and why? Let’s figure it out.
Problems with Traditional Currencies
It’s hard to imagine our daily routine without money payments. The number of operations processed by traditional financial institutions and systems is enormous.
The main problem of these transactions is their complication. In fact, only a seller and a buyer are needed to complete an operation, but there are a lot of intermediaries that slow down transactions and take extra fees. Another problem is the general vulnerability of sensitive data. A giant database updated with each new deal is accessible to banks and other authorities.
The chain is enormous for no good reason: a buyer – a payment system like Visa or MasterCard – a bank-issuer – a processor unit – a bank-acquirer – an electronic transfer system like ACH – a seller. Third parties charge additional fees and take more time to process each deal, but actually, they are quite useless and should be eliminated.
As a brief conclusion, here are five main problems of a current financial system:
- Total control. Banks know a lot about their clients.
- High fees. They are especially painful when it comes to international transfers and large amounts.
- Long processing. Transactions may take weeks depending on banks’ features.
- General complication. It may be difficult to deal with all the rules and documents required.
- A lot of third parties. They increase both the time and cost of each deal.
Potential Benefits of Crypto
All these problems with banks may push people to another approach. Here comes blockchain as a perfect solution. It’s a decentralized peer-to-peer network that uses a distributed ledger principle. Blockchain-based systems don’t feature a single central server, instead, they connect users directly.
Cryptocurrencies are financial entities powered by blockchain technology. They are open-source, almost totally anonymous, and relatively fast. These digital assets solve critical problems of the traditional finance industry by offering a quick and reliable system for everybody across the globe.
Digital currencies can’t be counterfeited because of the blockchain’s transparency. Also, blockchain-based systems work 24/7 unlike banks or other institutions. Surely, they aren’t ideal, but they do represent a new, revolutionary stage for the finances. Let’s figure out what practical values cryptocurrencies have.
Benefits for Customers
People want to use simple and efficient transferring and processing systems. Blockchain-based crypto projects provide a few valuable advantages:
- High privacy. No sensitive data can be tracked. Private keys for wallets are accessible to no one but the owner.
- Fast transactions. In blockchains, miners verify transactions. Some of the deals are instant, others may take up to several hours but definitely not weeks like in traditional systems.
- Borderless deals. There are no limitations or additional operations for transferring cryptos from one country to another.
Benefits for Merchants
Sellers of goods and services, as well as various business owners, also want to facilitate financial operations. In addition to benefits for customers listed above, cryptocurrencies grant following advantages for merchants:
- Low fees. Operations on crypto don’t need insane middlemen fees.
- New competition. Blockchain-based marketplaces ruin the monopoly of fiat payment systems. Merchants can choose better offers.
- Attraction for investors. With the hype around crypto, more and more people are interested in investing which is profitable for businesses.
A Bit of Scepticism
Obviously, modern technologies and inventions can’t be perfect from the very beginning. At the moment, four main issues of cryptos that need improvement can be distinguished:
- Scalability. Compared to payment systems like Visa, nearly all large crypto projects are extremely slow. Their blockchains aren’t ready to high loads from the worldwide community.
- Security. The high price of coins leads to frequent hacks and phishers’ attacks. Crypto developers must find out how to make systems more secure, while users should be aware of how to protect their funds.
- Volatility. For traders and investors, crypto is a source of earnings. But the market changes rapidly, and prices may significantly rise and fall within minutes.
- Legitimacy. Cryptocurrencies are in the grey zone in the majority of countries. Without proper regulation, they fail to become widely accepted.
However, these problems are natural, as cryptos are still in their initial stage of growth and development. By solving critical issues, cryptocurrencies will beat its path to a stable future. Powerful fiat giants are afraid of crypto and claim it’s a scam. Their fear does have solid grounds – owing to cryptocurrencies and the blockchain technology, the revolution of global finances is expected to happen.
