Cryptocurrency is a digital currency that can only be acquired by exchanging products and services between users. Users do not need traditional bank accounts for cryptocurrency transactions; they use virtual accounts referred to as digital wallets to store cryptocurrency assets instead. Similar to a real-life wallet, however, misplacing or having it stolen means losing your stored cryptocurrency.
Cryptocurrency History
DigiCash emerged as the first type of virtual currency for making anonymous transactions almost 20 years ago, which can be thought of as the origin of cryptocurrency. The DigiCash system collapsed in 1998, though. 10 years after the bankruptcy of DigiCash, Bitcoin was introduced and was the first system to use the word “cryptocurrency,” which has advanced and gained much popularity since then. Now, Bitcoin is not the only popular cryptocurrency as similar systems like Litecoin, Ethereum, and Dogecoin followed in its footsteps.
How Does Cryptocurrency Work?
Cryptocurrency serves almost the same purpose as traditional fiat currency. Users can use their digital coins to make purchases everywhere it is accepted without the expected annoyances of transferring funds. Moreover, users can use their funds for investments and contributions while also being able to exchange their cryptocurrencies for other altcoins as well as traditional fiat currencies.
Users can also choose to partake in a process known as “mining” to accrue more digital coins. For example, Bitcoin mining entails completing intricate mathematical algorithms using a computer to facilitate payments on the overall network, and those who can successfully execute the mining processes get paid with the coins.
Advantages of Cryptocurrency
Benefits are ample for those who buy products and services using cryptocurrency. In comparison to credit card purchases, users are required to disclose a lot less personal information in the process of cryptocurrency transactions. Also, it takes one click to complete every transaction with speedy processing times. Users additionally can choose to make purchases anonymously to keep their personal information protected.
Sellers of cryptocurrency reap various benefits, too. Once again, processing times are speedy, not taking any longer than an hour. Moreover, cryptocurrency transactions run without the need for a middleman like a payment service or bank. Most cryptocurrency platforms also accept direct deposits worldwide.
Pros of Cryptocurrency Over Fiat Currency
Some advantages seem clear given the ever-growing popularity of cryptocurrency systems in comparison to fiat currencies. For one, cryptocurrency cuts out the need for currency exchanges among nations because users are able to use the same cryptocurrency token in every country in the globe as long as it is accepted. Counterfeiting banknotes is not a possibility, which reduces the risk of fraudulent activities. Contrary to hard cash and precious metal transactions in some instances, the use and ownership of cryptocurrency cannot be deemed as criminal.
Cons of Cryptocurrency
While cryptocurrency poses only a handful of risks, the virtual currency system does have some setbacks. For example, if you have bet on a cryptocurrency that is grappling to get popular, you might need to gear up for some loss in value. Though the chances are slim, government-level cryptocurrency regulation in some countries is not so far-fetched, which could have restrictive effects.
Despite the drawbacks, however, cryptocurrency provides a level of accessibility and safety no other payment system can measure up to. Its benefits exceed its setbacks, which is gradually making cryptocurrency an indispensable component of the digital age we live in.
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Posted on May 22, 2023