Cryptocurrency is a form of digital currency that is working independently of the central bank. Cryptocurrencies are decentralized and support peer to peer transactions.
The other traditional forms of currencies like Dollars, Pounds, Pesos, Euro’s etc which are known as fiat currencies are defined by the respective countries’ central banks (Federal Reserves in case of US) while cryptocurrencies do not have any central authority or governing body behind them. Such combinations did not exist before 2009 when Satoshi Nakamoto created Bitcoin.
Although there are over 100 cryptocurrencies available today but seven of them account for more than 80% of total market capitalization. The top few among them include “Bitcoin”, “Ethereum”, “Ripple”, “Litecoin”, “Dash”, “Monero” and “NEM”.
Bitcoin was created as an alternative to regular currency which can be used for financial transactions without any need of a third party (like banks). Creation and transactions in “Bitcoin” are carried out collectively by the network after a proper verification process. For this reason, cryptocurrencies like bitcoin are considered extremely secure and transparent transaction system.
However, cryptocurrencies can be quite volatile; their prices may vary from moment to moment depending upon demand and supply. Although such fluctuations do not affect those who use cryptocurrencies as mediums of exchange, but it certainly scares away the individuals looking towards them as investment instruments. Some other challenges faced by cryptocurrencies include scalability, speed of transactions etc. But most importantly they lack wide acceptability and universal acceptance.
One of the features of cryptocurrency is that they are anonymous in nature which gives them an edge over regular currencies like US Dollar. Unlike fiat currency, all transactions in cryptocurrencies remain strictly anonymous so no one can know about your financial activities. Also, it enables users to purchase illegal goods without getting detected. The sole motive behind creation of such currencies was to facilitate easy and secure transfer of money without any government or financial institution’s interference. However, recent cyber-crimes have raised concerns over their use for fueling anti-social activities thus bringing down their acceptability rate among general public.
However, cryptocurrencies are still some time off from being accepted as a mainstream payment option but there are certain industries where they have made considerable progress towards it. Game currencies like “skins” are one of them which is valued at $50 billion. Many game players purchase these skins with fiat currency (Dollars or Euros) and then change them with cryptocurrencies to play games anonymously. Such transactions are carried out through many virtual exchanges that exist on the internet, peer to peer transfers etc.
Another area of challenge where cryptocurrencies have shown significant promise is in remittance industry where they are currently being used by more than 1 million people worldwide. Sending money from one country to another is a cumbersome process involved in many formalities, so workers prefer transferring their earnings through informal channels rather than legal ones for reduced transaction fees and faster transfer times. This has become possible due to cryptocurrency networks like Dash.
Currently there are over 100 companies all over the world that have started accepting cryptocurrencies as a form of payment for their products or services. Such companies include Microsoft, Dell, Expedia etc. Similarly different communities have started accepting cryptocurrencies as alternatives to fiat currencies to sell their products and services without any third party involved.
One of such community is Bunz (who I am part of) who use “Bunz tokens” as currency within our network which can be earned by trading your stuff with other members and then used to purchase items from each other with no transaction fees.
Similar initiatives taken up by other communities like SLIVER.tv; a streaming platform where viewers can earn crypto-tokens by viewing ads and using them to purchase virtual goodies from the website.
In future, we can expect many more companies accepting cryptocurrencies as a form of payments due to its potential benefits over fiat currencies like reduced transaction fees, faster transfers etc. Apart from it, cryptocurrencies will also make cross border payments easier thus boosting international business, travel, and tourism. Similarly, it will reduce the cost of remittances while its universal acceptability will allow people to easily transfer money across borders without worrying about exchanging one currency for another at unfavorable rates.