Before answering the big question – do we need cryptocurrency – let’s start by ensuring we understand what we are talking about.
Cryptocurrencies can be regarded as digital files that can be traded between two or multiple users/parties to transfer value. They can be used by anyone across the globe and there is no sign of national fiat currency. Every cryptocurrency stands out independently from fiat currency.
The popularity of cryptocurrencies has been rising day by day for the past couple of years. This asset has promised a higher percentage of returns than any asset class for the past year. The cryptocurrency market cap has increased 6 times from the beginning of this year, and will probably grow this year more and more as more applications of this industry become popular.
So, do we need cryptocurrency and, if so, why?
Importance of Cryptocurrencies
Some of the use cases of cryptocurrency are
As a Currency:
Cryptocurrencies work on the blockchain network, and hence are decentralised by nature, a fast and secure mode of payment. This has led to the adoption of these assets, as it makes it easier for industries to carry thousands of dollars-worth of transactions in relatively less time.
Also, since this is a decentralised system and not a centralised system, there are no middlemen involved. There is no need for the presence of banks or payment processing companies like Visa or American Express.
Many traditional financial institutions, like banks and governments, run on a centralised system and have control over how the financial transaction plays out. This is not the case in decentralised currencies like cryptocurrencies. These cryptocurrencies are not under the control of any single entity.
Among the benefits of transactions in the form of cryptocurrencies are:
- Fewer transaction charges
- Fast Transaction
- Secure Transaction
- No fear of bank account closure
- Easier
Investing Asset:
Investing in the right cryptocurrency assets has seen some investors receive well over 100% return on their investment. These returns have attracted a lot of attention, and an increasing number of investors.
Cryptocurrency utilities like, cryptocurrency mutual funds, have been become popular as they give access to a diverse range of portfolios.
Increase In Decentralised Applications:
All decentralised applications run on the core technology called blockchain. Cryptocurrencies allow transactions on these dApps to be carried out.
Some of the most widely known cryptocurrencies to run decentralised applications are Ether and Cardano, as their native blockchain technologies are being used for developing these applications.
Examples of dApps include:
- Crypto Exchanges
- Decentralized Finance Applications
- NFT marketplaces
- NFT games
Future of Cryptocurrencies
As the world gets to know the benefits and use case of these assets, more and more countries have started adopting cryptocurrencies. The benefits have fuelled the growth in the adoption by countries in accepting bitcoin, and other cryptocurrencies, as legal tender for payment of services. The increased international adoption is due to advantages cryptocurrencies offer such as:
- Transparency
- Decentralised Nature
- Fast
- Secure
Additionally, support to cryptocurrency investments has been provided by many countries including:
- Portugal
- El Salvador
- Switzerland
- Germany
- Singapore
- Malta
- Bermuda
These countries have shown support by allowing public investment in cryptocurrencies, promoting the growth of decentralised applications running on the blockchain, making cryptocurrencies the legal tender, providing investor-friendly incentives like a well-established taxation policy, and providing clear rules and regulations for these assets.
So, do we need cryptocurrencies? The debate will rage on and on, but the benefits of crypto as a currency and investment asset, the increasing use of dApps and the growing international acceptance of cryptocurrencies would suggest that the simple answer is ‘yes’.
