Cryptocurrency: A New Money Exchange System

Introduction

Cryptocurrency is an innovative way of exchanging money using advanced technology. It is a virtual currency that has the security of cryptography; which makes it impossible for the person to double-spend or counterfeit. It is also known as a digital asset that can be used as a new medium of exchange. 

The ownership of these coins is recorded in a digital ledger which is a computerized database that features excellent cryptography. It secures the transaction record entries, verifies the transfer of coin ownership and controls the creation of additional digital coin records. 

Cryptocurrency usually doesn't exist in the physical form since it is not issued by the government or central authority. There are a few different cryptocurrencies that use decentralized control. 

Bitcoin is a popular name when it comes to cryptocurrency. It is the first open-source software and is also known as the first decentralized cryptocurrency. It was created in 2009 by a pseudonymous developer Satoshi Nakamoto. After the release of bitcoin, around 6000 varieties of cryptocurrency have been created. 

We have written this article to help you understand the new way or medium of exchange other than the traditional money transactions. Cryptocurrency is a possible way of financial transactions for the world economy in the future. In this article, we have mentioned some important advantages and certain drawbacks of cryptocurrency.

Benefits of Cryptocurrency

1. Makes the Process of International Trade Easy

Cryptocurrency is currently not recognized as a legal tender in most countries. But it has great exchange rates and interest rates. Some types of levies and taxes are imposed in certain countries. Some countries are slowly supporting cryptocurrency.

It is free from currency exchange rate fluctuations since it uses peer to peer mechanism of blockchain technology to facilitate cross border transfers and transactions.

2. Offers Security from Identity Theft

Identity theft is one of the most common problems in the modern technological era. People are using credit cards, debit cards, and other digital transactions for shopping. It is not as safe as the cryptocurrency since it provides the merchants with full access even after the transaction is complete. 

Credit cards operate on the pull basis in which the merchant pulls the designated amount from the account. But when it comes to cryptocurrency, it uses a push mechanism that allows the user to send the exact amount to the merchant without providing any other information. 

3. Makes the Process of Transaction Easier

Cryptocurrency has changed the traditional way of transactions for businesses dealing with brokers and agents. Cryptocurrency also offers direct transactions with people. 

It has a peer to peer networking structure that helps in cutting out the need for middlemen while doing transactions. This has also reduced the confusion that usually occurs when someone does audit trails and is not much aware about who should pay what to whom.

4. Good Option for Immediate Settlement

This is another important advantage of cryptocurrency. Immediate settlement is very common when people purchase any property. By using cryptocurrency there will be no need to utilize the services of third parties like lawyers, notaries, etc who sometimes delay transactions. It is a great option for immediate settlements compared to the other traditional methods. 

5. Helps in Making the Transaction More confidential

It may not take long when traditional ways of transactions become history. Cryptocurrency has an advantage when two parties exchange and it works on a push basis that offers benefits to the payer to send their desired amount to the merchant without further information. This feature of cryptocurrency makes it highly confidential for transactions. 

6. Offers Worldwide Access

The access of cryptocurrency is available worldwide due to the availability of the internet and mobile phones. It is the best option for those who aren't able to get access to the traditional way of exchange. The trend of cryptocurrency is spreading worldwide. 

Countries like Kenya have phone-based money transfer and other micro-financing services and they have also recently announced the availability of bitcoin devices. 

Disadvantages of Cryptocurrency

1. Issue Related to Cybersecurity

The modern era involves the use of innovative technologies in daily life. With the advancement of modern technology; risks are also increasing, like the issue of cybersecurity. There have been many cases of cybersecurity breaches perpetrated by hackers. 

Various steps have been taken to enhance the cybersecurity measures of cryptocurrency. The measures taken for cybersecurity are comparable to the measures taken by traditional banking industries.

2. It Doesn’t Have Any Regulation

This is one of the biggest concerns of cryptocurrency. It is not regulated or controlled by any particular entity. Cryptocurrency doesn't come under the supervision of any central banks. These drawbacks of cryptocurrency make it risky to invest money. 

Other problems related to this technology are logistical. When technology advances it takes time to adjust and this disturbs the normal flow of the ongoing operations to update to the new technology.

3. The Problem of Scalability

This is a big concern related to cryptocurrency. The use of cryptocurrency and number of digital coins are increasing rapidly. This has also dwarfed the number of transactions done by the payment giant VISA each day. 

This technology is massively scaled due to which it can't compete with the transaction speed offered by global players like VISA and Mastercard. 

4.  Risk of Market Fluctuations

Cryptocurrency is also used as an investment option by most people. Now with the technological advancement, people are using cryptocurrency to purchase tickets, gamble online, or can buy even a house with it. But in the case of market fluctuation, the value of cryptocurrency gets affected and one can lose the money invested in it. 

5. Adverse Impact on the Environment

This is one of the biggest drawbacks of cryptocurrency for our environment. Cryptocurrency mining requires a lot of electricity and computational power; which makes the cryptocurrency dealing process highly energy-intensive. There are requirements for high performing computers and a lot of energy for cryptocurrency mining. 

This disadvantage of cryptocurrency makes it a problem for the environment. The mining of cryptocurrency can't be possibly done on ordinary computers. There are countries like China that use their coal to produce electricity for their cryptocurrency miners. This activity of mining has caused an increase in the carbon footprint tremendously.

Conclusion

In this article, we have provided substantial information related to Cryptocurrency. It can play a major role in the future of transactions and change the way financial transactions are done. With the introduction of cryptocurrency and the advancement of technology, there is an overall improvement happening in the financial sectors. 

This technology offers the world a less risky and convenient medium to conduct financial transactions. There are some disadvantages of this cryptocurrency that comes along with its benefits. Those drawbacks are also mentioned in this article. Technology can revolutionize our lives and make it much easier to do business and process transactions.