Cryptocurrency has fast been gaining an important place in financial markets since the last few years. These are digital currencies, and are fast taking over the financial markets as methods of transaction, thanks to the ease in transfer and storage, and, more importantly, the higher level of security. Although BitCoin is probably the most well known of the cryptocurrencies currently available, quite a few are doing the rounds, LitCoin, Ether, Ripple, Peercoin, and Litecoin to name a few. In this article, we will discuss what makes cryptocurrencies so coveted and so important in the world of business.
There are about 2.2 billion people in this world who have regular access to the internet, either via their computers, tablets, or mobile phones, but do not have access to traditional monetary exchange systems. Cryptocurrency is the way to go for this group of people. And companies have started to cash on in this requirement; for instance, the M-Pesa system in Kenya, which is a micro financing and cell phone based money transfer firm, has recently included BitCoins as one of the currencies in which payments could be made. This makes sense, since almost one third of the Kenyan population currently owns a Bitcoin wallet.
Cyber crimes are on the rise, and this is probably the biggest arena where cryptocurrencies like Bitcoin win over traditional currencies. You need to store your traditional money in the bank, and in this age, a lot of us rely on online methods to make payments and transfers and purchase goods and services. While doing so, we are redirected to a payment gateway from the merchant website, where we are required to provide details of our credit or debit card, and some banking details as well. While this method is encrypted and assumed to be safe, the current slew of hackers gaining access to bank servers has brought into the limelight the flimsiness of security measures put in place by banks. On the other hand, cryptocurrencies are nothing but complex codes, and are protected by user specific passwords and usernames in a digital locker. There is no way to get to them.
Circumvents identity theft
And it is not just about securing your money. Banking frauds via the internet is also one of the most prominent covers for identity theft. When you make a transfer online using your credit or debit card, you are revealing information that is unique to yourself. You have no control over the information that you share, neither before nor after the transaction. This makes you highly vulnerable to fraudulent individuals stealing your identity and using your details for illicit purposes. The transfer of cryptocurrencies, on the other hand, will require no more than your name, and you can decide exactly what information you will be sending out to the recipient.
Exchange of traditional currencies usually involve paying a certain amount extra as transaction fees to the banks involved, and also to third party payment gateway providers if any are involved in the procedure. The exchange of cryptocurrencies, on the whole, usually does not involve the payment of such fees. This is mainly because the miners are, as of now, being compensated by the network. However, it is to be noted that this is not completely free all the time, since some third party services, such as Coinbase, do charge their users a very small transaction fee, but that is quite negligible compared to what the other third party payment service providers typically charge. Of course, this might change as cryptocurrencies grow in usage and acceptability, but as of now, transactions are really inexpensive.
Control over the money
One of the biggest advantages of dealing with cryptocurrencies is the level of control you have over your own money. First of all, they are not owned by any bank, so you do not have to answer to the bank or to the government regarding the amount of cryptocurrencies you have in your possession. Secondly, since you own the wallet completely, and are the only one with access details to the same, there is no chance of a miscommunication or a technical glitch occurring that will freeze your money, something that might happen with third party money exchange platforms. For instance, when you have some money in PayPal, the company has complete rights to freeze your currency in case it detects anything that might not appear to comply with its standards. You will be required to jump through all the hoops to clear and unfreeze your account. The Cryptocurrency wallet does not stand any such chance. The only way you will lose access to your money is if you lose the access details to your wallet.
Bitcoin was created back in 2009, and since then, cryptocurrencies have gone from strength to strength. The highest exchange rate Bitcoins have seen has been at $2 billion USD, but saw a drop by almost 50 percent shortly thereafter. This has sparked a debate regarding the usability and durability of cryptocurrencies in a world still heavily dominated by traditional currencies. However, it is still too early to tell what the fate of this new age currency will be, but there is no doubt that it is off to a good start.