We, as human kind, have come a long way. At one point in time, we were solely reliant on the Barter system, the ‘give some take some’ technique of acquiring goods. Then we moved onto coins of metals we mined from the earth. The current most popular form of money is the fiat currency, or the physical currency which we carry around in our wallets in notes and coins of various denominations. But now, we are seeing a shift in the financial system. A change that will most likely change our definitions of the words ‘mined’, ‘currency’ and ‘wallets’. We are noticing the rising popularity and acceptance of cryptocurrency.

Origin of Cryptocurrency

Ecash is a form of cryptographic electronic money that was invented in 1983 by a cryptographer by the name of David Chaum. He created a piece of software that rendered digital money transactions untraceable to outside parties.

The idea was developed and improved over time, and Satoshi Nakamoto, an unidentified person, finally created Bitcoin in January 2009.

More than 20,000 cryptocurrencies are in use right now.

The primary goal of cryptocurrency is to eliminate the need for middlemen in financial operations. This improves process security and reduces the possibility of transactional loss. The blockchain is a digital ledger that records all transactions and is more commonly used as a medium of trade for cryptocurrencies. All verified transfers are performed through the blockchain.

A digital currency created to function as a medium of trade is cryptocurrency, also referred to as crypto. In addition to controlling the production of new units of a specific digital currency, it uses cryptography to secure and validate transactions. 

Blockchain technology, a distributed ledger maintained by a distributed network of computers, is the foundation of many cryptocurrencies. Cryptocurrencies differ from fiat currencies like the US dollar or the British pound because no central authority issues them, possibly making them immune to manipulation or government intervention. Most coins run successfully without the support of a government or central bank. The operation of cryptocurrencies is supported by decentralized technology called blockchain, as opposed to depending on assurances from the government.

Bitcoins are not a collection of bills or coinage. They rely solely on the internet to survive. Think of them as virtual tokens, the worth of which is determined by the forces of the market established by those looking to buy or trade them.

The process of "mining," which involves using computer processing power to answer challenging mathematical problems in order to make coins, creates cryptocurrency. Users can also buy the currencies from brokers, keep them in encrypted wallets, and use them to make purchases.

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Benefits of Crypto

As it is said, “Necessity is the mother of invention”. Let me add to it and say, “Its benefit is what makes it stay”. 

If we stop for a moment to think, we already had our currencies in our wallets. Why then was there a need for cryptocurrencies? The truth of the matter is that we don’t always have our money in our wallets. At least not all of it. Neither are our transactions hand to hand like in the barter system. Most of our money is under the vigilance of third party vendors like banks and financial institutions. In moments of crisis there is always a possibility of our accounts being blocked, alienating us from our own assets.

Then comes crypto. It is decentralized, that means that there is no third party involvement in our monetary transactions. Every transaction is recorded and tracked using blockchain technology. This encryption is one of the biggest benefits of crypto. There are many more such benefits, which guarantee that this digital currency will soon be the new step in our financial development. 

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• Crypto for Lower Income Nations

Crypto has sparked innovation. It has led people to newer entrepreneurial projects. The adoption of cryptocurrencies can help less developed countries achieve these goals, such as easier access to life-saving medications, new agricultural marketplaces, and more efficient transportation. Entrepreneurs in emerging markets will be able to develop cutting-edge solutions to problems in the real world if they have the resources and funding to innovate in the crypto sector. A greater effort could be made to use cryptocurrency's potential to help the developing world by investing more time, money, and cerebral capital in it.

To use the crypto ecosystem, one does not require authorization from any governmental or financial institution. Additionally, having a bank account is not a requirement for participants. In the modern world, there are billions of individuals who are "unbanked," or do not have access to the financial system, including bank accounts. But with cryptocurrency, all of those people need is a smartphone to effectively become their own bank.

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• Low cost High speed Transactions

In contrast to, for instance, the charge for transferring money from a digital wallet to a bank account, the transaction cost for cryptocurrencies is minimal to nonexistent. There are no time restrictions on transactions, and both sales and withdrawals are unlimited. Additionally, anyone can use cryptocurrencies, unlike opening a bank account, which necessitates paperwork and other proof. Even quicker than wire transfers are international cryptocurrency transactions. Money is transferred between locations via wire transactions in about half a day. Transactions involving coins are completed in a matter of minutes or even seconds.

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• Accessible to All

All one needs for cryptocurrency is a smartphone and internet connection. Seeing that in the modern world nearly 90 per cent of the population owns a smartphone and with the internet connecting us all even from the remotest places on earth, getting into crypto is no hard task. This deems the digital currency as accessible. Cryptocurrency can be used by anyone. Comparing the process of establishing an account at a conventional financial institution to that of setting up a cryptocurrency wallet, the latter is incredibly quick. There is no ID checking. There isn't a credit or background screening.

With the help of cryptocurrency, people who lack bank accounts can access banking services directly. An individual may be unable or unwilling to open a traditional bank account for a variety of reasons. People who don't use conventional banking services may be able to send money to loved ones or conduct online transactions with ease by using cryptocurrencies.

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• Secure

Decentralized cryptocurrencies typically function as secure payment methods because they are based on encryption and blockchain security. As a result, one of the greatest advantages for users may be the relative security of cryptos. Hash rate is a key factor in cryptography protection. More processing power is needed to compromise the network the higher the hash rate. Due to its tendency to have a greater hash rate than other networks, Bitcoin is regarded as the most secure cryptocurrency.

Additionally, due to the design of the blockchain system and the distributed computer network that verifies transactions, transactions are safe. The network gets safer as more processing capacity is added to it. Before the rest of the network can confirm the accuracy of the ledger, any attack on the network and attempt to change the blockchain would need enough computing power to confirm multiple blocks.

The level of security in crypto can go two ways. The crypto wallets can only be accessed through a key that will be in possession of the wallet owner. However, if one loses their private key they will no longer have access to their digital assets.

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• Opportunity for Exponential growth

The main attraction point for investing in crypto is the high return that one can achieve. A few years ago, the price of Bitcoin was around a fraction of a penny. However, today it has grown to thousands of dollars. In fact, one of the best-performing investments over the past 13 years has been bitcoin. This level of growth cannot be expected from the stock market. Although many of those subsequently saw price collapses, some alternative coins have outperformed Bitcoin by significant margins. And it's crucial to remember that because cryptocurrency values have recently dropped significantly. For instance, the price of Bitcoin has decreased by more than 60% since 2022. Prices in the cryptocurrency market have exhibited this level of volatility, which has been a major advantage of cryptocurrencies for day traders and speculators alike. Trading can generate profits even when values decline by taking advantage of price fluctuations.

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• Opportunity for Diversification

As the saying goes, ”Don't put all your eggs in the same basket.”, with so many digital currencies in the market, one is provided with enough opportunities to invest in various different crypto currencies and thereby save their losses. Compared to conventional financial instruments like stocks and bonds, cryptocurrency can provide investors with diversification. Although there is little historical data on how the cryptocurrency markets have performed in terms of stocks or bonds, so far the values don't seem to be correlated with those of other markets. They could be an excellent source for portfolio diversification because of this.

You can produce more consistent returns by combining commodities with low price correlation. Your crypto asset may increase if your equity portfolio decreases, and vice versa. Still, if your asset allocation is too heavily skewed toward cryptocurrencies, it may wind up making your entire portfolio more volatile. And that is where proper research helps. But it's important to keep in mind that over the past few years, cryptos have started to sporadically trade alongside equities for brief periods of time.

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• Trade whenever you want

The New York Stock Exchange (NYSE) and other stock exchanges are only available on weekdays from 9:30 am to 4:30 pm Eastern Time. The majority of conventional financial markets are closed on nights, weekends, and holidays.

Contrarily, crypto marketplaces are always working around the clock, every day of the week. The only things that could prevent someone from trading cryptocurrencies would be a power loss, an internet problem, or a failure of a centralized exchange.

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• Guarantees Transparency

Imagine completing a transaction, with no record of it happening. This happens more so with our physical transactions of money. But that is not the case with crypto. On the widely used blockchain ledger, all cryptocurrency transfers take place. Anyone can use tools to check up transaction information, including the where, when, and quantity of cryptocurrency sent from a wallet address. Also visible to anyone is the amount of cryptocurrency kept in a locker.

Transparency to this extent can lessen fraudulent deals. A person can demonstrate that they sent money and that it was received or that they have the necessary funds to complete a deal.

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•  International Transactions

National boundaries are irrelevant to cryptocurrencies. Without any additional difficulty, a person in one nation can transmit coins to a person in another nation. Transferring money across international boundaries can be time-consuming and expensive with conventional financial services. Due to rules, sanctions, or conflicts between particular nations, doing so might not even be feasible in some circumstances. However, cryptocurrency circumvents all of that because users can conduct peer-to-peer transfers from any location in the world.

Conclusion

Among the most significant benefits of cryptocurrencies is their simplicity of use, security, and freedom from restrictions on transactions. Even though they haven't yet gained much traction or adoption, many cryptocurrencies are built to have distinct benefits over fiat money or the conventional banking system.

Of course, there could be problems, with instability being a significant drawback. However, as with anything else, those who are interested in buying, selling, and trading cryptocurrencies it would be wise to conduct their own study prior to participating in the market.