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Monday, January 24, 2022

Cryptocurrency and the Cashless Future

Currently, there are 200 cryptocurrencies out there. Some are valued at cents while others cost a whopping $58,000. The rise of cryptocurrencies has made the government and traditional banks reassess the entire monetary system. 

We are already living in times where cash is replaced by plastic money. Banks have provided us with Visa and MasterCard to purchase things online whether it’s ordering food buying entertainment in the form of Spectrum packages. Will cryptocurrencies replace the current cashless system? It’s currently being investigated.

It started with gold and silver and then paper money came along followed by plastic money. Then, innovators like Elon Musk, Mark Zuckerberg, and Jack Dorsey started hyping cryptocurrencies. The adaptation may be slow, but there is no doubt crypto is here to stay.

The Blockchain Technology

There is a driving force behind every crypto, the technology that made it possible is called a blockchain. To understand it, let’s take bitcoin for instance. It is a digital currency minded by its users who are incentivized to use it. Bitcoin is a peer-to-peer version of electronic cash. It allows you to send payments from one party to another without involving a financial institution or any other third party. The technology that makes it possible is blockchain. 

When bitcoin is sent from one user to another, and inflexible public block records the transaction. As more transactions happen, more blocks are created forming a blockchain. It is a public record of all transactions. These blocks are generated every 10 minutes. The user responsible for these blocks receives a wage in the form of bitcoin (which is newly issued). This process is also called mining. 

Advantages to a Crypto Future

There is a report that throws light on the possible outcomes if crypto surpasses the cashless system at some point in the future. It’s important to consider that crypto cannot be manipulated like cash because it’s decentralized. Also, it can offer better support to the conception of universal basic income than cash. Crypto could also eliminate the use of intermediaries in daily transactions, hence cutting business costs and helping consumers.

Let’s throw some light on the benefits of this form of currency:

  • Easy transactions 

Since there is no middleman involved, crypto transactions are simpler than ever. All the transactions take place under a peer-to-peer networking structure. There is more accountability and no confusion about who pays whom. Parties involved in the transactions know their responsibilities.

  • Confidentiality

Every transaction takes place on the blockchain network. The exchanges are made on a push basis. It is easy to send what you want to the recipient. This protects the financial history of the investors. They are protected from the threat of identity which is prevalent in the traditional system.

  • It’s everywhere 

Cryptocurrencies are stored in digital wallets. Hence, they can be carried anywhere. These wallets can be easily managed via mobile devices. This means you can use crypto to buy anything you like and make payments whenever you want even if you are on the go.

  • Transactions are traceable

No doubt your identity remains anonymous, but all transactions are traceable. They are stored on the blockchain and are verified by nodes (decentralized network of devices) timestamps are created and linked to previous transactions. This creates a chronological series of all transactions.

These transactions are irreversible. They are updated on devices participating in the network. Third-parties are not allowed to manipulate the system on this network nor can the sender reverse payments. 

The Possible Challenges

There are some concerns and challenges to a crypto-based future. First of all, traditional currencies will lose their value. New infrastructure would be required to allow the world to adapt. There will be difficulties in the transaction because cash will become incompatible very quickly. This could mean people will lose their assets. Financial institutions will suffer as well.

The next party that will suffer is the government. Right now, the government controls central currencies and is regulating them in many ways. Crypto isn’t controlled by anyone which means the government will lose control. The government would no longer determine how much currency to print. In fact, generating new tokens or coins will depend on the mining operations, which are, of course, independent.

The Question of Security

Going cashless is the best way to keep your money safe. No one can steal your money! If you prefer going cashless and you somehow lost your phone, your funds will be safe because they are in a mobile wallet. These wallets are protected by additional layers of security.

Bitcoin users are not bound to reveal they’re true identity when sending or receiving bitcoin. However, all transactions are traceable via blockchain technology. Blockchain is there to offer an end-to-end user experience and build trust.

Should I Invest in Cryptocurrency?

In the midst of this all, if you are wondering should you be investing in cryptocurrency, then the answer is yes. Crypto transactions are happening worldwide. Yes, there are risks involved but these risks are less compared to fiat currency. 

When investing in crypto, don’t place all eggs in one basket. In other words, don’t just invest in Bitcoin development or bitcoin currency, invest in other currencies too. Check their stability by studying the history and investing accordingly. Form a diversified portfolio to protect your investment.

Along with investing in crypto, you may also experience the joy of completing transactions in crypto. Lots of retailers are now accepting crypto payments.

What Does The Future Hold?

It is plain to see that cryptocurrencies are here to stay. However, its future in terms of replacing the cashless system remains uncertain. For it to be possible, governments and money regulators will have to accept it as something legitimate. Price stability is imperative too for it to become appealing to consumers and merchants. This will be possible if stakeholders such as Google Pay, Visa, Amazon, and other giants accept cryptocurrencies. 

It is highly unlikely that crypto will replace the current cashless system. But crypto will certainly become a part of the monetary system.

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