At the moment with all of the lockdowns and economic uncertainty a lot of people are shifting their interests to cryptocurrencies again and quite often I’m asked why would people trust it as opposed to a standard financial system (e.g. banks)
In most developed nations we’ve been incredibly lucky to not have to be worried by financial system collapse but then COVID-19 has certainly changed that now for a large amount of people. However even before COVID the financial systems in other nations being decimated lead people to look for alternatives of where to store value and money.
Traditionally people would look to things like gold and silver, basically anything that wasn’t money or real estate to retain value over time. Cryptocurrencies have now provided an alternative store of value that in most cases is not tied to a centralised service like a bank. For people that had gone through financial crisis they will have experienced trying to receive money from a bank and simply being told no you can’t have it – a concept incredibly foreign to those that have never had to experience it.
Asides from being a store of value there are Cryptocurrencies that provide functionality beyond just being a store of value or being an alternative to money. For example Ethereum’s ability to standardise the creation of ERC-20 tokens has meant that organisations or teams wishing to create a new application can effectively raise funds via an ICO (initial coin offering) tied to the application they are creating – instead of having to go out to investors or listing a company this is now available as an alternative.
Currently there are countries seeking to regulate the cryptocurrency world as seen with the recent BitCoin crackdown in China. America as well has began efforts to regulate the industry. These regulations are occurring because countries are noticing that cryptocurrencies can be a big threat to the way their financial systems operate. In other countries though such as Australia we have already regulated to a degree meaning that Crypto is not actually destroyed people just plan for how they will use and store the currencies based on the current tax rules
Cryptocurrencies are sometimes given a bad wrap as there are sometimes bad people involved in them – however this is no different to everyday life where a credit card can be stolen and you should always be cautious with making any decisions around finance.
Hopefully in the future more vendors will be accepting of cryptocurrencies and make it a more trusted form of exchange for goods and services. Right now Amazon, Facebook and even Walmart have indicated that they intend on offering the ability to pay in some way via crypto to their users.
Cryptocurrencies largely return autonomy back to those that hold it, they become responsible for the storage and the exchange and are not beholden to someone external being able to control something that is rightfully theirs. This is important because as seen recently it is quite easy for an online payment processor or a bank to simply ban someones ability of being able to transact – something that is not possible via use of most cryptocurrency wallets.
Decentralisation (the distribution of reliance from a central source of authority) is important and this is what Cryptocurrency can offer many people – the ability to not be at risk of the decision of an entity or provider that controls your ability to receive money. For example Paypal and Visa/Mastercard have all threatened or in some cases removed peoples ability to transact in a variety of cases some of which are questionable as to why they should be allowed to do this (to see examples just google Mastercard bans)
Right now given the economic instability of many areas of the world this is why people are moving money into this area. It’s no longer really about turning a quick profit (although that is still possible as well) its about long term protection and resilience.
If you would like to learn more about cryptocurrencies a great resource is where it all really kicked off from – the bitcoin whitepaper