what is the benefit of buying cryptocurrency?
What are the benefits of investing in cryptocurrencies? Cryptocurrencies have grown in popularity over the past few years, and there are over 1800+ cryptocurrencies so far! This number is still growing. Cryptocurrencies have brought us many conveniences and benefits. Let's take a look at what are the benefits of buying and using cryptocurrencies?
A Brief History of Cryptocurrencies
In cave days, people used a barter system. In this system, two or more people exchange goods and services. For example, someone can trade seven apples for seven oranges. The barter system is no longer popular because it has some obvious flaws:
People have to be consistent - if you have a deal, someone else has to have it, and you have to have something that someone else has to offer.
There is no universal measure of value - you have to decide how many items you are willing to exchange for other items, not all items are divisible. For example, you cannot divide live animals into smaller units.
Unlike our modern currency, goods cannot be easily transported and can be placed in a wallet or mobile phone.
After realizing that the barter system was not working well, the currency went through several iterations: an official currency was minted in 110 BC; gilded florins were introduced and used in Europe in 1250 AD; from 1600 to 1900 Years, paper money was widely used and eventually used all over the world. This is how modern money as we know it was born.
Modern currencies include banknotes, coins, credit cards and digital wallets such as ApplePay, AmazonPay, Paytm, PayPal and more. It's all controlled by banks and the government, which means there's a centralized regulator that restricts the operation of paper money and credit cards.
What is cryptocurrency?
Cryptocurrency refers to a string of encoded data in monetary units. The peer-to-peer network monitoring and organization of cryptocurrency transactions known as blockchain, such as purchases, sales, and transfers, is also used as a secure classification of transactions. Cryptocurrencies can be used as money or as an accounting system.
A cryptocurrency is a digital or virtual currency designed to be a medium of exchange. It is very similar to real-world currency, but it does not have any physical entity and works using cryptography.
Since cryptocurrencies operate independently in a decentralized manner, there is no bank or central authority. New units can only be added after certain conditions are met. For example, with Bitcoin, miners can only be rewarded in Bitcoin by adding a block to the blockchain, which is the only way to generate new Bitcoins. Bitcoins are capped at 21 million; after that, Bitcoins will no longer be produced.
The future of cryptocurrencies
The world is clearly divided when it comes to cryptocurrencies. On the one hand, Bill Gates, Al Gore and Richard Branson and other proponents say that cryptocurrencies are superior to ordinary currencies. On the other side are Warren Buffett, Paul Krugman and Robert Schiller and others against it. Nobel Laureates Krugman and Shiller, who they called Ponzi schemes and criminal activity.
In the future, there will be a conflict between regulation and anonymity. With several cryptocurrencies linked to terrorist attacks, the government wants to regulate the operation of cryptocurrencies. On the other hand, the main focus of cryptocurrencies is to ensure that users remain anonymous.
Future scientists believe that by 2030, cryptocurrencies will account for 25% of the domestic currency, which means that many people in the world will start to believe that cryptocurrencies are a way of transacting. As they have done over the past few years, it will be increasingly accepted by businesses and customers and will continue to fluctuate, which means prices will continue to fluctuate.
The benefits of cryptocurrency
With cryptocurrencies, transaction costs are practically zero - not the same as the cost of transferring money from a digital wallet to a bank account. You can trade day or night, and there are no restrictions on purchases and withdrawals. Unlike opening a bank account, anyone can use cryptocurrencies for free. The latter requires files and other files.
International cryptocurrency transactions are also faster than wire transfers. It takes about half a day to get from one place to another. With cryptocurrencies, transactions only take minutes or even seconds.
1. Transaction speed
If you want to send money to someone in the US, there are few ways to transfer funds or assets from one account to another faster than using cryptocurrency. Most transactions at U.S. financial institutions settle within three to five days. Wire transfers usually take at least 24 hours. Stock trades should settle within three days.
However, one of the advantages of cryptocurrency transactions is that they can be done in minutes. Once the network confirms the block containing your transaction, it will be fully resolved and the funds will be available.
2. Transaction costs
Cryptocurrencies have relatively low transaction costs compared to other financial services. For example, it is not uncommon for a domestic wire transfer to cost $25 or $30. International money transfers can be more expensive.
Cryptocurrency transactions are generally cheaper. However, you should be aware that the need for blockchain will increase transaction costs. Even so, even on the most crowded blockchains, moderate transaction costs are still lower than wire transfer costs.
Anyone can use cryptocurrencies. All you need is a computer or smartphone connected to the internet. The process of setting up a cryptocurrency wallet is very fast compared to opening an account at a traditional financial institution. There is no authentication. No background or credit checks.
Cryptocurrencies provide a way for the unbanked to access financial services without going through a central authority. There are many reasons why a person may be unable or unwilling to obtain a traditional bank account. Using cryptocurrencies allows those who do not use traditional banking services to easily conduct online transactions or send money to relatives.
4. Incredibly Safe
Decentralized cryptocurrencies based on cryptography and blockchain security tend to provide secure payment methods. This may be one of the surest advantages of cryptocurrencies.
Cryptographic security depends heavily on the hash rate. The higher the hash rate, the more computing power is required to disrupt the network. Bitcoin is by far the most secure cryptocurrency of any network, with the highest hash rate.
However, using an encrypted exchange is as secure as the exchange itself. Most cryptocurrencies have been hacked, involving exchanges being hacked or personal mistakes.
You can maintain a certain level of privacy because you can transact with cryptocurrencies, and under circumstances transact with cryptocurrencies. Transactions are anonymous, which means you have a token on the blockchain — your wallet address — but it doesn’t contain any specific information about you.
This level of privacy is desirable in many situations (whether innocent or illegal). In other words, if someone links a wallet address to an identity, all transaction data is public. There are several ways to further obscure transactions and several privacy-focused coins to improve the privacy of cryptocurrencies.
All cryptocurrency transactions take place on a public distributed blockchain ledger. There are tools that allow anyone to find transaction data, including the location, time and amount of cryptocurrency sent from wallet addresses. Anyone can see how much cryptocurrency is stored in the wallet.
This transparency can reduce fraudulent transactions. Some can prove that they have sent money and received it, or they can prove that they have funds for the transaction.
Cryptocurrencies can provide investors with diversification of traditional financial assets such as stocks and bonds. While price trends in the crypto market are limited compared to stocks or bonds, so far, prices do not appear to correlate with other markets. This can make them a good source of portfolio diversification.
Combining assets with the least price correlation results in more stable returns. If your stock portfolio goes down, your crypto assets may go up, and vice versa. However, cryptocurrencies are often very volatile. If your asset allocation relies too heavily on cryptocurrencies, it could end up increasing the volatility of your overall portfolio.
8. Inflation protection
Many people believe that Bitcoin and other cryptocurrencies are inflation-proof. Bitcoin has strict limits on the total number of coins to be minted. Therefore, as the money supply increases more than the Bitcoin supply, the price of Bitcoin should increase. There are many other cryptographic mechanisms to limit supply and serve as a hedge against inflation.
9. Huge returns
It's no secret that Bitcoin has been the best asset of the past 12 years. Since 2009, Bitcoin has been basically worthless. It will rise to fractions over the next few years, eventually reaching tens of thousands of dollars. This represents millions of percentage points. By comparison, the average annual return for the S&P 500 is about 8%.
At times, some fake coins are much better than Bitcoin, although many of them later saw their prices plummet. Volatility is a price characteristic of the cryptocurrency space, which is probably one of the most famous cryptocurrencies (losses, on the other hand, may be one of the most famous drawbacks), and this has been the main feature of cryptocurrencies for day traders and speculators One of the benefits.
10. More private transactions
Privacy may be one of the benefits of cryptocurrencies, but encryption is not as private as some people think. Blockchain creates a public ledger account for permanently recording all transactions. While the ledger only shows wallet addresses, transactions can be tracked if observers can link a user's identity to a specific wallet.
While it’s worth noting that most crypto transactions are anonymous, there are ways to make more anonymous transactions. Coin mixing services combine transactions, confusing to outside observers because it is difficult to separate them. Individuals running full nodes also make their transactions more opaque, since observers cannot always tell whether a transaction running through a node was made by the person running the node or someone else.
This method can be difficult for those who are new to cryptocurrencies. So while absolute privacy is indeed not one of the main advantages of cryptocurrencies, transactions are often more private than using legal currencies and third-party payment processors.
11. Cross-border payment
Cryptocurrencies do not consider borders. Individuals in one country can send coins to people in another country without any difficulty. With traditional financial services, cross-border funding can take a long time and be very costly. In some cases, this may not even be possible due to legal regulations, sanctions or tensions between specific countries.
12. A more inclusive financial system
Some of the benefits of cryptocurrencies extend to those without access to the traditional financial system. Because of its decentralized and unacceptable nature, anyone can participate in one of the benefits of cryptocurrencies.
People can use the crypto ecosystem without any financial institution or government permission. (Although it's worth noting that Bitcoin mining is banned in China.) They don't necessarily need a bank account. Billions of people today are "unbanked" which means they have no access to the financial system, including bank accounts. With cryptocurrencies, these people only need a smartphone and they can basically be their own bank.
The benefit of buying cryptocurrencies
With all the benefits cryptocurrencies have over fiat currencies and other asset classes, it's hard to argue that using or investing in cryptocurrencies is worthless. For many who are concerned with fast and secure transactions, many cryptocurrency offerings are extremely valuable. Also, over time it will only become more accessible and reduce technical barriers.