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“We also accept credit cards”

“We also accept credit cards” we all have heard or read this in many places but today, the world is shifting towards cryptocurrencies and the day is not far when cash and credit cards would be completely replaced. Technology has played the biggest role in shaping and revolutionizing the lives of people. It has changed the ways they shop, communicate, or work. Registers were replaced with online databases, shopping centres shifted towards online stores and people stopped writing letters to each other as technology took over. The world today is reined by technology and cryptocurrencies are a step towards the digital world of tomorrow.

How Globalization Will affect ?

Due to globalization, the majority of people have heard the word Cryptocurrency but many of them do not understand the real concept on which it is based on. Cash is the money that is physically present and is exchanged with goods, the advantage of cash is that it becomes the physical property of the person who has it and the owner decides when and how to invest it. Digital currency on the other hand is the money which is present electronically; it gets transferred between the owner and the buyer in exchange for services. To make secure transactions, banks play their role to make such exchanges. A third party owner sees when something gets bought and securely transacts the money from the buyer’s account to the service provider.

How Crypto Currency Work ?

Crypto currencies do not involve such third parties or a ledger that could hold the accounts of people. In order to understand how cryptocurrencies work, it is better to take an example of the financial system which was based and was functional in real life. One such system is the Stone system which was used in the Island of Yap. The people of Yap had large disk-like stones situated on the Island of Palau which was a few miles away from their land. They used boats to physically move these stones and whoever took the stone to the island, was considered as its official owner. As this process was labour-intensive so an alternate method was introduced. The stones remained in their place however the value attached to them was circulated among people. Whenever a person transferred the stone to another, the news was spread among people so the ownership could be declared. This often led to many conflicts as this system was based on a ledger system of distribution; every single person took record of the ownership of the other and false news was sometimes circulated.

BTC Leading 2000 Crypto Currencies

Today, there are about 2000 different cryptocurrencies in the world. Among them, Bitcoin is the leading one. It is a virtual economic system and holds no physical object of representation. In Yap, the Stones were the unit that was not physically moved only their value was circulated; here Coins are the basic units of the system which are virtually transferred among people without the involvement of any third party such as banks etc. In this, the private system allows owners to remain anonymous unlike the distributed ledger system of Yap island where the units were openly declared revealing the identity and ownership.

BTC Block

Units of Crypto currencies such as coins in Bitcoin are being bought with real money. A person simply transfers the money from their bank account to Bitcoin, from where they use it to buy coins. After every 10 minutes, Bitcoin makes a new block. This block contains the details of every transaction that has been made within that time frame. The word “ledger” has been used to describe each block and the whole series of blocks is termed as a block chain. Single Bitcoin that was about 1 dollar in the year 2011 now costs around 66,117.10 US dollars today. That’s how its value increased from almost nothing to digits that now sound costly to us.

Peer To Peer Transaction

A transaction that is “peer to peer” based and also secured is among the hottest topics of the financial industry nowadays. Crypto currencies are secure to use because they use cryptography that is not so easy to counterfeit. They are developed on block chain technology where the transactions being made are recorded in the blocks. This time-stamped process is not just technical but highly complex in nature as the overall result of combined transactions is just visible blocks and a chain which is formed by them. This feature makes crypto currency quite hard for cyber attacks. It is protected by a 2 layered authentication process. Apart from being highly secure, it is a system that has no central authority involved such as banks that do not let governments and other agencies interfere trying to manipulate it for their own benefit.

Pros & Cons

As every technology and revolution that has ever taken place had its pros and cons, so does crypto currency. This currency type has many advantages which play a major role towards digitalization but come with certain disadvantages as well. It is an attractive medium because as it does not include government interference so it allows people to transfer their money within or outside the county, without having to worry about the taxes or regulations put forth by governments. It provides anonymity and liberty to its users across the globe with minimal fee charges per transaction. At present, different countries especially the ones that want to diminish the use of cash have declared cryptocurrencies especially Bitcoin’s validity as a currency. This leads to the fact that as the market of crypto currencies have grown to such an extent, banning it would lead to a great loss for many countries.

Resistant Against Inflation

It’s a step ahead of what we know as online banking, because it does not disclose the personal information of people. In crypto currencies for example Bitcoin, the data about when and how the transaction was made is shared but it does not provide any detail about the person who gave it or about the one receiving it. Inflation occur when the value is connected to any product like oil etc, but here with crypto currencies like Bitcoin; they are resistant against inflation because their rate is independent with no physical product being attached to its value. As the Bitcoin company has already mentioned that there will be only 21 million Bitcoins that will be mined overall so this system is immune against inflation. Unlike online banking where banks and governments control all transactions with fee and tax deduction, this system is free of all that anywhere around the globe.

The crypto market is expanding

The crypto market is expanding because of the integrity of this system as it does not allow cancellation of payments and coins and currencies can neither be copied nor can be used twice for any purchase. These systems do not put any commissions on transactions and the operational fee is just 0.1 percent of every transaction. It has led to decentralization as the power of systems and accounts is not controlled by any central body and every user is a part of distributed system where they decide the rules of what to do with their coins. Unlike many banking systems around the world, crypto currencies are much easier when it comes to operation. There are no lengthy and complex procedures of registration and it takes just a few minutes to create a Bitcoin wallet and start transactions without any hurdle.

Crypto Currency Is Anonymous

However this system of crypto currency is anonymous but it’s fully transparent to use. The information about the company purchasing Bitcoins and the one transferring them like address etc is not required for transactions here in this system; but the history of transactions made is stored in each block. The block chain keeps record of every transaction but it depends on the company whether they want to show how much of the Bitcoin was purchased or not otherwise the companies can keep it private. Only the owners have access to their wallets and control the transactions unlike Banking system where they can freeze the account due to any reason or anytime and the person is helpless in this regard. Credit cards can be stolen and the person who knows the key to it can actually use it but here as there is no personal information involved, the data cannot be stolen for such frauds.

Learn How To Behave Like Cryptocurrency

Unless and until banks learn how to behave like Crypto currencies, they won’t be able to overcome its power of dominating the future of economical world. The reason is that although many people say it can be used to launder money and for terrorism but the point is that it provides transparent, anonymous and negligibly charged transactions without any limitation. These systems contain enough potential of facilitating trades and reducing costs in order to replace every method of money transaction of today’s world only if there is no more conflict over it among governments of the world.

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