Financial institutions risk exposing their customers to cyberattacks or hacks for which they are unprepared. Bitcoin and other cryptocurrencies offer a decentralized peer-to-peer payment system that does not require merchants to pay fees or share sensitive customer information to accept payments from customers. For more information about Bitcoin visit BWC.
Additionally, with their inherent transparency and lack of dependence on centralized authorities, blockchain-based currencies open up new levels of financial freedom humankind has never seen. Recent reports have recognized the rise of cryptocurrencies in their annual Global Risks Survey.
The report focused on the growing adoption of blockchain technology, with “Cyber Attacks” as number one on their Global Risks list. The experts see blockchain as the de facto standard for trustless transactions on a global scale, stating that it “has the potential to redefine transactions.”
It’s no secret that we are entering a new age where data breaches and cyber security threats are at an all-time high. With all of its current flaws, Bitcoin is still this generation’s most widely adopted cryptocurrency. Let’s discuss how cryptocurrencies are the new financial revolution.
Deflationary Properties of Cryptocurrencies:
Cryptocurrencies are not tangible and will never be frozen. As a result, deflation is a thorny issue that affects their use as common currencies. The CPI uses fixed weights to “adjust” nominal prices over time, while RPI uses an inflation adjustment by adding or subtracting quantity to keep a one-off benchmark price constant over time.
The current deflationary state of Bitcoin prevents large merchants from accepting it for products and services because there is a social expectation that their cost of goods and services will increase. The deflationary nature of currencies such as Bitcoin may cause widespread adoption problems in the future.
In addition, the value of bitcoins tends to increase over time, which makes deflation an ongoing threat to maintaining short-term price stability. Therefore, to maintain an influx of new buyers and avoid the backlash from sellers accepting the currency at lower prices shortly, merchants are forced to keep prices high, effectively putting themselves out of reach from most potential buyers.
Cryptocurrencies can Fix Soaring Remittance Fees:
While there have been breakthroughs in the past year, in the financial aspect of cryptocurrencies such as Bitcoin and Ethereum, remittance is still a significant problem for millions worldwide. In addition, the cost of capitalizing and managing them is also extremely high, with little incentive to use. As a result, the remittance market is massive, with a calculated value of $630 billion in 2016 alone.
According to the World Bank (2017), global remittances reached an estimated $600 billion in 2016, which translates to a staggering 12% per year. With current systems worldwide requiring expensive fees to be paid by both sender and receiver (often up to 10-30% of transfer value), many people opt out. By allowing smoother transactions, cryptocurrencies can reduce the high cost of sending money and convert it into a more efficient solution.
Security Issues:
As with any new technology or system adopting a cryptocurrency, there will always be security flaws that need to be addressed. In addition, there are several concerns regarding the anonymity of those using Bitcoin and other cryptocurrencies, as well as the ability for users to track the identity of their wallets across multiple platforms.
When used correctly, cryptocurrency is an effective solution to many issues related to cybercrime and hacking attacks. However, cryptocurrencies require standardization and proper management to truly become ingrained in the global financial system.
Currently, a handful of platforms are working in this direction. For example, Ripple has come on leaps and bounds over the past year and is predicted to be one of the leading platforms for cryptocurrency adoption in 2018. However, another issue that needs to be addressed head-on is the nature of transactions and the speed at which cryptocurrencies can transfer value.
Bitcoin will never face bankruptcy:
To be truly accepted as a currency, cryptocurrencies will require the backing of nations, states, and financial institutions. Many argue that Bitcoin doesn’t have the intrinsic value to be used as a commonly accepted currency, but this is a myth.
As with all types of currency around the world, bitcoins derive their value from the trust that they are stable; they will not disappear or plummet suddenly in value overnight. In addition, no one can change bitcoin’s protocol to manipulate the money supply because miners must confirm all transactions using an agreed-upon protocol. As a result, Bitcoin has no single point of failure and will not collapse due to an event like bankruptcy or default.
Many people, especially those outside the financial world, don’t understand why a digital item can be valuable in the first place. However, when considering the value of bitcoins vs gold, diamonds, shares of Apple Inc., and other forms of liquidity and value, it becomes clear that bitcoins have the potential to be used as a form of investment towards financial freedom. The above-listed portion depicts some reasons why cryptocurrencies are the new financial revolution.
