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As it is known, cryptocurrencies are popular all around the world. We are at the right time to ask the question of why we need crypto. Physical tokens like banknotes, silver, and gold coins have been used as a source of payment for centuries. However, Satoshi Nakamoto introduced the world’s first cryptocurrency called Bitcoin.
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Bitcoin emerged a few weeks after the Emergency Economic Stability Act in the USA in October 2008 prevented the collapse of the financial system. This serves as a peer-to-peer electronic cash system, based on cryptographic proof, where participants can interact directly without the need for a reliable third party. Investors can use Bitcoin for the first time to transfer money directly and securely. For example, any network participant can verify and resolve transactions at a reasonable cost thanks to the intelligent combination of cryptography. However, we should not forget that he does it using the Bitcoin blockchain.
What is the Purpose of Cryptocurrencies?
Why Do We Need Crypto? We should deeply know the purpose of the crypto we research without asking these questions. Cryptography is used to create cryptocurrencies. Also, these assets are protected by mathematical algorithms.
Debt is a process that creates traditional fiat currencies; therefore, the numbers in your accounts essentially represent an obligation. This is a kind of collateral system. However, nobody can buy cryptocurrencies utilizing debt. Instead, cryptos have their own value and represent this value.
Cryptocurrencies aim to keep individuals in control and responsible for their assets. Therefore, Bitcoin, a non-permissive payment method, is a stand against the influence of banks and governments on citizens’ financial activities.
Another example is Monero. XMR is an untraceable, safe, and private cryptocurrency. It is an open-source software that everyone can use. With Monero, you would become your financial institution, your financial situation would be under your control and responsibility.
If you are still thinking about whether there is a need for cryptocurrency, remember the serious shocks caused by the collapse of the over-leveraged dollar equivalent product of the global finance market. However, the emergence of blockchains like Ethereum causes faster transactions, unlike traditional banks.
Can Crypto Replace Banknotes?
Both fiat currencies and cryptocurrencies do not have a natural value. Their values are derived from the trust users have in central banks for fiat currencies, while for cryptocurrencies, the blockchain technology and the verified consensus.
While centralized authorities control fiat currencies, cryptocurrency transactions have a decentralized structure. Many organizations like JP Morgan are researching to understand the importance of digital assets in the commercial world. In addition, countries like El Salvador have adopted Bitcoin as a legal payment method. However, it is hard to predict when crypto will fully replace fiat currencies.
Moreover, maintaining the balance of both central and decentralized money systems is crucial for the success of the transition from fiat currencies to cryptocurrencies. According to Deutsche Bank’s 2030 forecast, blockchain, technologies that support unlimited decentralized access to fiat currencies and digital currencies will add value.
However, the adoption speed of blockchain technology shows that phasing out the old physical wallet and storing all the money securely on a blockchain ledger could take ten years or less.
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