Cryptocurrencies are the next big thing in the global financial realm. It appears to be a matter of when more than if. The most popular cryptocurrency, Bitcoin, has begun to gain traction and at one point recently was worth more than an ounce of gold. Of course there is skepticism in Bitcoin and cryptocurrencies as a whole, but that could be blamed on a lack of understanding by the public. If anything, Bitcoin and the way it works is going to shift the way money works, which we will go over in this article.
How It Works
To start it off, money today flows through large banks and institutions and can be traced back to their origins. This takes time and costs money because it has to flow through entities and be processed. With Bitcoin, it uses what is called a blockchain. A blockchain is created when Bitcoin is moved and is unable to be altered. What also is great about Bitcoin is that it’s decentralized, which means it moves from peer-to-peer and not through a banking system.
The benefits to Bitcoin and other cryptocurrencies is that it will eliminate the worry of people obtaining your personal information because most transactions are done without using personal information. This means you can send money to a person and greatly lower the possibility of a criminal obtaining your identity and using it fraudulently. Don’t confuse this with the storage of your Bitcoin because someone can hack your computer and obtain your coins, so be sure to store them in a safe environment or even in physical form.
Secondly, Bitcoin can be transferred peer-to-peer without the use of large banks, which speeds up the process of sending money. This is a huge benefit because instead of waiting 1 to 2 business days, money can be sent and received within minutes. Not only saving time, but also this saves money, as there are no fees charged for sending Bitcoins.
One of the drawbacks that is keeping this from being mainstream is it’s not traceable, and we all know the government wants to be able to track this. Until there is a way for the government to track it, some time may have to pass before it becomes a mainstream currency.
Secondly, the current state of Bitcoin has many people nervous who are unfamiliar with the cryptocurrency space. As with anything in life, if you don’t understand it, you are more likely to be skeptical. Until there is mass adoption, it will take time for this method of payment to be highly effective. Not only that, but there are so many different types of cryptocurrencies that it can become really overwhelming.
Bitcoin is the currency of the future and with time, will be adopted and widely used. The SEC just denied a Bitcoin ETF, but the creators are going to try again in the near future. As disappointing as that may sound, that is encouraging news because there is hope that this can be a mainstream method of payment and even investmenting.