It is just a matter of time. Cryptocurrencies will change the world or, rather, they are already changing it. A new economy is emerging. With just an internet connection, people are making all sorts of transactions virtually, without the need of any intermediary, financial institutions, documents to fill in, huge amounts of money on fees and impossible procedures.
Online digital currencies are not easy to understand and so remain in the early stages of adoption. But people are quickly becoming aware, not only of the way they operate, but also of how useful they are in everyday life.
Although Bitcoin is the first and most recognized cryptocurrency, there are many others, all of them supported by blockchain technology.
The blockchain can be compared to a ledger, or database. Each block in the chain contains data, just like a page in traditional ledger. But the crucial advancement over a traditional ledger is that the blockchain exists in a distributed fashion. Each block can only be added to the previous one if the information contained within it is agreed upon by the consensus of a majority of the participants of the network. In the case of Bitcoin, there are hundreds of thousands of participants called nodes confirming transactions as they appear. All participants agree to follow the rules laid out in the blockchain protocol. Once a block is agreed as correct according to the protocol (consensus algorithm), it is added to the chain and cannot be altered. This means that once confirmed, transactions can’t be reversed.
In this way, blockchain technology enables, for the first time, secure transaction of value without the need for an intermediary. While credit and debit cards enable money to change hands digitally, they still rely on a central authority like a bank. The disadvantage of requiring a central authority is that users are subject to high fees, especially when transacting across borders. Blockchain technology, however, eliminates the need for banks by enabling direct peer-to-peer exchange, and because transactions are distributed across servers all over the world and data is cryptographically secured, it is nearly impossible to hack. Digital currencies are the money of the future so it is important to understand the technology behind them and how they will shape the economy of the future.
So, to start to get informed, the following are some of the advantages of cryptocurrencies:
1. Transparency: Blockchain technology permits every transaction to be available to everyone, although the private information is secure.
2. Lower Fees: The fees on cryptocurrency transactions are considerably low in comparison to bank enabled exchanges or other online monetary transactions. Sometimes these fees are only required if the user wants a faster transaction.
3. Decentralized: As cryptocurrencies are supported by blockchain technology, there is no need of an intermediary, central authority or any third party service provider. In other words, it is a decentralized network which operates on a peer-to-peer basis, using the power of cryptography.
4. Seamless Exchanges: Cryptocurrencies can be easily exchanged into other cryptocurrencies or fiat in exchanges and be transferred to the user’s bank account.
5. Rapid Exchanges: Usually cryptocurrency transactions take only a couple of minutes.
6. Privacy: The identity of the cryptocurrency users is secure thanks to cryptography technology; no information is sent to the government or any financial entity.
7. Availability: Cryptocurrencies are available anytime and anywhere in the world. The users do not depend on bank’s schedules.
Now is the perfect timing to start diving in to the waters of the cryptocurrencies ocean. Now is the time to take advantage of the diverse options available, making, of course, very well informed decisions.