As technology advances, we are afforded more choices in how we live our lives. Fintech has made it possible so we don’t have to use cash, check or credit card to make a purchase. There are other payment platforms we can use, such as Google Pay and PayPal. We can also choose an electric car over a gas-powered one. The same goes for currency. We now have the option of choosing to use cryptocurrency. It sounds futuristic, but cryptocurrency has been around for some time. Before we get into the benefits of cryptocurrency, let’s talk about what it is.
Simply, cryptocurrency is digital money made up of algorithms. It is also a digital asset since it can be traded like a stock. Many have doubts about using this new form of currency, especially since crypto- means hidden in Greek. However, it has gained a great deal of attention in the past ten years with the cryptocurrencies that have been created, such as Bitcoin and Litecoin. Bitcoin was the first cryptocurrency released in 2009. It was created by Satoshi Nakamoto as a way to prevent a payment network from make a transaction twice (double spending).
There are many benefits to using cryptocurrency. Traditional currencies (e.g. the U.S. Dollar) depend on third parties to make transactions and centralized servers, which have proven to be unreliable (e.g. fraud). The technology behind cryptocurrency is blockchain, which uses a decentralized server and encryption to ensure a transaction is secured. Blockchain is an electronic ledger that stores cryptocurrency transactions. They must be verified in order to be processed. A day’s worth of transactions are stored in a “block” of data that is connected to another block, forming a chain. Each block is stored in a different location, unlike a bank. This makes it virtually impossible to track down a transaction as well as alter or delete it.
Cryptocurrency is slowly becoming accepted around the world. There are countries that are creating regulations for using cryptocurrency, such as Japan and Australia. It is only a matter of time before cryptocurrency is as common as paper money or credit cards. Once cryptocurrency becomes mainstreamed, it will be hard to go back to using traditional currency. Also, it will be interesting to see the choices that will develop from using cryptocurrency.