The dynamic nature of technology results in new inventions and innovations daily. The fintech world, in particular, has seen more than its fair share of disruptions in the recent past. The birth and growth of cryptocurrency is one such creation. It has increasingly become a significant defining aspect in this domain.
Cryptocurrencies are encrypted digital currencies destined for a predicted era of cashless transactions. Bitcoin was the first innovation in this line. Ever since its introduction, almost 900 other virtual currencies have come into existence. Some of the most successful virtual currencies to date apart from Bitcoin include Ethereum, Ripple, Litecoin, and Dash. Bitcoin and Ethereum have market capitalization figures above $65 billion and $25 billion respectively.
Each of these currencies offers a solution to a problem in the legacy frameworks. Any new coin’s success depends on how well it addresses its target problem. This implies that there can be no limit to the generation of new currencies. For as long as problems and loopholes emerge, there will always be a new innovation to handle them.
The Unique Advantages of Cryptography and The Digital Currency
There are some notable benefits that set digital currency apart from regular or fiat currency. Encryption or cryptography is the most outstanding common factor for all digital currencies. This is an advanced security system that limits access to sensitive transaction information. They use a system of private and public keys to secure transactions. This allows only the intended parties to access sensitive information. These transactions are very difficult to fake and once they are confirmed they cannot be reversed.
A single central government entity generates and manages fiat currency. But the industry offers unlimited access to all. There are no third parties monitoring activity. Transactions are open-source and based on P2P networks. This means that no bank or government can interfere with or affect in any way these currencies.
The fact that there are no central bodies monitoring transactions really simplifies everything. You waste no time waiting for approval of funds to become available. Sensitive accounts that usually need a lawyer’s oversight are also simplified. This is because they feature automated smart contracts.
There are no transaction fees on transactions. This is because there is no oversight authority needed. Further, interest rates and exchange rates do not govern the currency’s use. This saves the users significant expense. It also makes this a viable alternative to fiat currency.
Problems Facing Virtual Currencies
Looking at all these benefits one might wonder why virtual currency has not replaced its fiat predecessors. According to TechCrunch, “So the question is, why do the prices change so much in the first place? It comes down to supply and demand: Most cryptocurrencies have only a fixed total supply, and yet demand for the coins is uncertain and constantly fluctuating thanks to speculation.” In other words, the major factor of hampering the mass adoption of cryptocurrencies is price volatility.
Lack of Security
The fact that confirmed virtual currency transactions are irreversible is a major issue. It means that Go to the full article.
Source:: Business 2 Community