The Good Side of Crypto: What are some of the positive effects of cryptocurrencies?

Recently, the crypto market has been on a goose chase. Wherever you see, there's a buzz about the crypto market.

While many people think it's a bubble, there's no denying that the crypto market does have a positive side. Many consider it the future of our financial system, enabling borderless transactions and limiting state control over the economy.

So, in this guide, we'll explain the positive effect the crypto market has globally and how it is changing our financial system.

So what are cryptocurrencies all about?

Before going to the positive side of crypto, it's important to mention the idea of cryptocurrencies.

Cryptocurrencies act as a form of payment. It uses cryptography to guard and verify transactions and produce new currency units, thus the "crypto" prefix (coins).

Cryptography allows you to encode anything easy to decode with a key but impossible to interpret without one, which means coins are complex to manufacture, but transactions are simple to verify.

Counterfeiting currencies is exceedingly difficult or impossible due to the blockchain, a public record validated by many distinct nodes. It also makes tracing particular transactions between anonymous user accounts or wallets easier.

Several business organizations have created currencies that they can trade for goods or services. These currencies are known as tokens. Similar to games of chance or casino chips. Using the item or service requires conversion of actual cash for cryptocurrency.

Some stats about the market

At the time of writing this, the total value of the 2,000 current cryptocurrencies is $121 billion. A market research website known as "CoinMarketCap.com" proves that more than 10,000 types of cryptocurrencies change hands every day. To raise funds, the market uses ICO (initial coin offerings). As a result, it has led cryptocurrency to be more popular.

According to an estimate, the overall value of all cryptocurrencies was more than $1.9 trillion on August 18, 2021. In April, the estimates went down from a peak value of $2.2 trillion. On the other hand, the entire value of all bitcoins, the most widely used digital currency, was estimated to be at $849 billion, up from recent lows. Apart from that, the market value has fallen drastically from a peak of $1.2 trillion of Bitcoin in April.

On the one hand, when we compare it to traditional currencies: the total value of physical money estimates to be around $5 trillion. Cryptocurrencies thus account for just 2.4 percent of actual fiat money and much less when other kinds of money, such as those held in checking or savings accounts, are included in.

This sum is not as insignificant, on the other hand. Cryptocurrencies are already worth more than the GDP of nations like Ukraine and Morocco. This indicates that the total wealth of all crypto-currency owners is more than the GDP of any of the 130 nations.

Bitcoin's market capitalization surpassed $300 billion in January 2018. If Bitcoin had been a nation, it would have been among the Top 40 richest countries globally at the time.

Why are the reasons behind cryptocurrencies' popularity?

There are a number of reasons why this is so and how cryptocurrencies have an immense appeal. Here are some of the most common:

· Many believe that cryptocurrencies are the future. They think cryptocurrency is the future method of currency exchange. Like gold or any other asset, they want to invest before the values go up to gain more monetary returns.  

· Central banks, through inflation, tend to depreciate currency over time. So it is believed by some that bitcoin tends to free central banks from controlling the money supply.

· Others believe that cryptocurrencies can be more secure than traditional payment methods due to the decentralized nature of blockchain technology, as it is considered safer than conventional payment methods.

· Some people are only interested in cryptocurrencies because they believe that value increases over time. But they don't consider as a long-term method of money transfer.

Ok, now that you the idea behind the crypto market, let's move to its positive sides.

What is cryptocurrency's Influence on the global economic system?

The crypto industry is already huge, and many international institutions oversee all digital coin exchanges.

Here's how the crypto market is changing the global financial system:

Providing basic banking

More than a third of the planet's population lacks access to basic banking services that may assist them in the event of a personal financial emergency, such as loans, checking accounts, and so on. Therefore, those already in financial difficulty are more likely to engage in dubious and dangerous loan practices.

These methods charge unjust interest rates, increasing the risk of people applying for loans. Unfortunately, the extreme volatility of cryptocurrencies and their simplicity in use make them perfect for this.

Many apps are now available that make it simpler to apply cryptocurrencies and bring them closer to a larger audience. Another edge that cryptocurrencies have is decentralized, which allows a deal between the two countries. As a result, technology will allow a financial revolution where everybody can join the bandwagon and become more financially coupled, invested, and enabled.

Cryptocurrency's relation to inflation control

Inflation is the root of a currency losing its value over some time. Almost every cryptocurrency are circulated with a fixed number at the time of their introduction. Source code specifies the number of each currency; for example, bitcoins have a global limit of 21 million.

Hence when there is a rise in demand, its values also peak. Which in turn prevents inflation from occurring as well in the long run.  

For example, cash in your savings account will frequently lose value over time as prices rise, implying that the dollars you save now will be worthless in the future. Cryptocurrencies, at least in principle, should be immune to these changes.

Global recognition

The exchange rate risks you encounter when doing business globally or traveling can affect your transactions due to the exchange rate. Additionally, you may be charged fees to convert one currency to another, or you may have difficulty exchanging money at all. Cryptocurrencies like Bitcoin don't have this problem because their value is widely accepted.

By doing so, you save time when establishing a transaction's pricing and any costs associated with changing money from one form to another.

Financial transactions will become more efficient and quick once Bitcoin becomes more widely accepted throughout the world.  

Making business easier

Because blockchain technology and cryptocurrencies can support businesses to receive payments in several currencies, there has never been a better time to start a business.

BitPesa is a company that helps African entrepreneurs conduct financial transactions with European, American, and Asian companies. The objective is to help small and medium-sized enterprises all around the globe have better financial coverage and a more open financial relationship with the rest of the world.

Using BitPesa and TenX's digital wallet, entrepreneurs can quickly convert cryptocurrencies into fiat cash, which they can then utilize for company investments, purchases, and payments.

Decentralized nature

One of the key advantages of bitcoin is that it is mostly decentralized. Many cryptocurrencies are managed by the developers who use them. Those who own a large quantity of the coins or a company that develops them test them before putting them into the market.

Unlike fiat currencies controlled by the government, decentralization helps keep the currency monopoly open and in check so that no single person or an institution can decide the flow and worth of the coin. This, in turn, keeps it stable and safe.

Lower transaction fee

When you look at your bank account, you will notice the transaction fee levied for any transaction you make. If you make multiple transactions each month, the charge might add up quickly.

The cryptocurrency network would pay the data miners; thus, there would be no cost or charge very low. However, if you commit the management of your crypto wallet to a third person, you must pay for the service. On the flip side, cryptocurrency transaction fees would be lower than those imposed by existing banking systems.

Private transactions

When you use a credit or a debit card, your transaction history logs in, and the banks have access to this data. The bank keeps a record of every transaction you make. You may, however, see the account's balance at any time. There will be a lot of financial record checks while doing sophisticated company operations.

The best thing about applying bitcoin is that every transaction you make with the recipient is unique. Every contract has the potential to generate a term debate. The data transmits via a push technique.

You can only share information with the people you choose to share it with. So, you can keep your financial info private, and your identity will remain safe.

Limiting government monopoly

People fret that quantitative easing and other kinds of monetary stimuli, such as close interbank lending rates, will lead to long-term financial instability and worse than high inflation rates. However, national banks can govern these figures like the US, so experts advocate for cryptocurrency.

In other words, cryptocurrencies provide a secure means of trade that is not subject to the direct authority of these central banks, who together control the world money supply.

Even if cryptocurrency promoters' dire predictions of fiat-fueled financial distress do not come to anticipate, they want world governments to co-opt or at least integrate elements of cryptocurrency. These elements include built-in supply/demand and authentication methods — into fiat currencies. This may answer some bitcoin advocates' fears about the volatility of fiat currencies and the essential indecision of actual money.

Other positive sides of the crypto market

Cutting out the middle man

Another significant advantage of applying bitcoin, particularly when acquiring real estate, is that it can assist in avoiding high-cost brokers, attorneys, and other traditional "middlemen" who inevitably boost the expenses of already high-cost transactions.

Take control

One of the nicest things about cryptocurrencies is that you have complete control over them, unlike almost any other form of money storage (save a wall safe or your wallet). Consider this: the vast majority of traditional liquid asset systems, such as banks, financial institutions, brokerage houses, and even sophisticated systems like PayPal, grab ownership of your assets and subject you to their terms of service.

They have the authority to suspend your account if they determine that you have violated those conditions. In addition, they have the power to modify their terms of service, causing you to pay more or receive less money for key transactions.

With cryptocurrencies, you keep all of your cash on hand digitally, without the participation of a third party. You are the only one who can modify the conditions of your cryptocurrency use.

Portfolio diversification

Many investors are adding cryptocurrencies to their diversified portfolios as assets since they provide numerous advantages in faultless transactions and inflation control.

Because of the market's non-correlated nature, you can use cryptocurrencies as a risk hedge, like precious metals like gold. As a result, several cryptocurrency exchange-traded funds (ETFs) and exchange-traded notes (ETNs) have developed. You can invest in them directly or can choose a platform like a brokerage firm to buy crypto.

Security

A cryptocurrency transaction is digital and encrypted, unlike a traditional payment method such as a credit card or cash. As a result, stealing crypto is far more challenging than taking cash from a wallet.

In a world when so many of our transactions are happening online, anything that enhances transactional security is good. But, unfortunately, there is currently no transaction method that is more reliable and secure than bitcoin transactions.

Mining is available for all

One of the benefits of cryptocurrencies is that there are no barriers to entry. You may set up your computer to mine coins for you with a few internet searches.

You're unlikely to earn much money mining Bitcoin without a massive setup. Still, with certain lesser-known currencies, you might be able to set up your computer to create some additional cash without you having to do anything.

Crypto without mining

The mining of cryptocurrencies necessitates a large quantity of energy. It's worth mentioning, however, that a huge majority of cryptocurrencies have a minor environmental impact.

EOS and Cardano are proof-of-stake blockchains that do not require mining and can execute transactions using the same amount of power as a typical computer network.

Making the world a global village

Cryptocurrency will fully come into its own when more individuals, especially billions of people in underdeveloped countries, will utilize mobile devices to perform financial transactions.

Due to their low transaction costs and no fees, all cryptocurrencies will gain popularity as more people obtain mobile devices for financial transactions. Mobile phone technology swept swiftly over the developing globe in the late 1990s and early 2000s, saturating regions where traditional landline lines had never been deployed; bitcoin sets to do the same.

Self-governed

Any currency's governance and upkeep are critical to its growth. Miners are paid for storing bitcoin transactions on their hardware by accepting the transaction fee.

Because the miners are compensated for their work, they maintain transaction records accurately and up-to-date, ensuring the cryptocurrency's integrity and decentralizing the records.

Wild price swings

The rarity of a currency, the work required to mine it, and the qualities of the coin all contribute to its worth. In one month, the value of a virtual currency might swing by more than 30%. Stock trading can experience comparable swings in normal years, although it is less typical.

Making money is feasible in this environment, but it also implies that one tiny error may cost you a lot of money. For example, any mention of a certain currency on social media may cause enormous price fluctuations.

Bitcoin's value has fluctuated quite a bit in the past. For example, bitcoin experienced an 8% fluctuation from October 2017 to January 2018. In addition, there was more than double the volatility of bitcoin over the 30 days ending January 15, 2020.

But why is this?

The perceived volume of bitcoin vs. fiat currencies is one reason why it may vary against them. Bitcoin has qualities that are comparable to those of gold. It is regulated by the core technology's creators' choice to limit output to a set number of 21 million BTC. So, that's why BTC and other cryptos experience wild swings.

Final thoughts

The world moves at a rapid speed. The increasing acceptance of cryptocurrencies suggests that traditional financial institutions are losing ground, and new financial demands are emerging.

Similarly, the world needs to break down boundaries to achieve complete social and financial inclusion - and blockchain technology offers all the tools necessary to address these issues.

It will only be a matter of time until these cryptocurrencies become firmly entrenched in our lives, changing them for the better in terms of economic progress.

Thanks to the enormous possibilities that cryptocurrencies provide, millions of people will be able to invest, transfer money across borders, earn money, and start a business.