When cryptocurrency was first introduced to the world in 2008, no one knew that it would explode years down the road. Now, several cryptocurrencies are available in the global market. While most people are still skeptical about its success, others have put all their life’s savings into crypto and now enjoying the fruits of their investments. So, what is crypto, and how would it benefit you?
In case you plan to invest in cryptocurrency and have been wanting to dig out its possible benefits, this is the place for you.
Before we jump to benefits, let’s take a look at what cryptocurrency is.
What is cryptocurrency?
A cryptocurrency is a digital currency that is a medium of exchange. It is different from paper currency since it does not have a physical form like notes or coins. Instead, cryptocurrency relies on cryptography and blockchain technology.
It involves sizeable decentralized computer networks, making cryptocurrency a much safer option for online transactions. These networks are responsible for managing blockchains that act like virtual records of transactions involving crypto. As a result, there is no mediator for a transaction involving cryptocurrency, unlike paper money.
There’s been hype about investing in cryptocurrency thanks to popular cryptocurrencies like Ethereum and Dogecoin. Although popular cryptocurrencies like Bitcoin and Ethereum are much more expensive to invest in, you can check out the recent ones that would give some return years down the road. Additionally, there are plenty of digital platforms where you can check out the exchange rates of various cryptocurrencies against yours. For instance, the btc into pkr rate is upwards of 4 million PKR. Definitely, not the right one to purchase if you’re a first-time investor!
Related: How Cryptocurrency Can Help Startups in 2023
Benefits of Cryptocurrency
1. Protection from devaluation
By now, almost everyone has an idea of how inflation erodes the value of money. Money loses its value over time, whether with notes and coins in your wallet or a low-yield savings account. Since crypto’s demand is readily increasing, it is also growing in value. The evaluation of crypto helps sustain its market. In the long run, it prevents your “investment” from being devalued due to inflation. So, the money you invest in crypto today would later have a higher purchasing power than what it already is.
2. It runs on a decentralized network
Unlike a bank account, where an entire financial institution looks over whatever you do with your money, cryptocurrency is decentralized and independent of any authority. Besides the blockchain developers at the backend, no one has a clue what you’re doing with your cryptocurrencies. It makes trade using crypto much more secure and reliable. Fiat currency has a legal tender, the Government, and thus is regulated, but that’s not the case with crypto. So, whatever you buy or sell using crypto, it’s secluded.
3. Speedy transactions
Unlike bank transactions that take a couple of days to settle or wire transactions that take up at least a day, transactions funded by cryptocurrency take up only a few minutes. The speedy transaction is one of the main reasons why many people are switching to cryptocurrency. Blocks, which make up the “blockchain,” store information regarding your transaction. Once the decentralized network verifies the block, you can use the associated funds.
4. Low transaction costs
Apart from speedy transactions, cryptocurrency has a relatively cheaper cost. Other financial activities like bank or wire transfers may charge a couple of bucks per transaction. It’s even higher if you’re making an international transaction. Crypto, on the other hand, requires way less money. Though the transaction charges may fluctuate depending on the associated blockchain, it is lower than other modes of transaction. Furthermore, since no intermediary is responsible for managing the affairs, there are no high transaction costs.
5. No legal tender or governance
Unlike paper currency, cryptocurrency does not have a governance system or legal tender. Instead, cryptocurrencies are managed by the developers or miners who have created them in the first place. They charge a small transaction fee for controlling the interchange, and that’s it. What you get in return is a safe and steady mechanism for carrying out transactions.
6. Ease of access
One of the benefits of cryptocurrency is its ease of access. Almost everyone knows what it is, and that’s because of how accessible crypto is. Plenty of digital platforms in the form of websites and mobile applications allow you to create a digital wallet and connect it with your bank account. Setting up a digital wallet for crypto is much faster than opening a traditional bank account. Unlike bank accounts, there are no tedious and lengthy verification procedures for opening a digital wallet. Despite being a conventional practice, many people don’t find the modern-day banking system safe for several reasons. In that regard, the safety net and ease of access to cryptocurrency are preferred.
7. Smooth currency exchange
Like cryptocurrency, stock trading and currency exchanges have also become the talk of the town. You can also buy stocks and currencies with crypto. While investment in crypto assets is riskier than other options, it is incredibly lucrative.
On the contrary, you can buy crypto using most currencies like the Indian and Pakistani rupee or Euros, not just the US dollar. It is even easier to exchange currencies through crypto. The transaction costs are lower, and it’s a relatively faster route.
8. Secure transactions
The main reason behind crypto’s popularity is not its ease of access or low transaction fees but its security. We previously talked about the decentralized network of computers, which makes cryptocurrency transactions so safe and reliable.
Digital wallets for crypto have a secure private key known only to you. If you lose the key, you might never be able to access your wallet or funds. The blockchain system makes your transactions secure, and since every transaction requires verification from the network of computers, it is difficult to hack into it. The hacking difficulty comes from the fact that you need an equally extensive network of computers to attack a blockchain system, which is downright expensive. A few cryptocurrency breaches were primarily due to inadequate security measures in the centralized network of computers.
9. Diversification
If you’re an experienced investor or considering investing, you need to know about crypto’s diversification opportunities. Apart from other financial assets like bonds, stocks, and currency, cryptocurrency is a good way of diversifying your investment portfolio. In addition, unlike other assets, crypto prices are uncorrelated with markets for other assets, thus making them an excellent opportunity for stable return on investment.
Conclusion
The numerous benefits of cryptocurrency over traditional fiat currency make it difficult to ignore when it comes to investment or trading. For example, cryptocurrency not only provides excellent value for investment but is much more secure and reliable than traditional financial institutions.
