People often rush to adopt new technologies with or without understanding them. Similarly, people, including novices and experts, have increasingly bought into Cryptocurrency and its supporting technologies, blockchain, web 3, etc., without knowing a thing about them. You can vividly see people say; “blockchain for social impact”, “blockchain for good and bad”, etc., On the other hand, people run unregulated ICOs, IEO, and other fundraising schemes to key into cryptocurrency and blockchain or integrate the same into their existing projects without asking if it is necessary. Cryptocurrency and blockchain are buzzwords or lingo in the fintech space and beyond, and people explore them without due diligence. However, before making decisions around it, it is necessary to ask or be hesitant to know what interests them in the space, Cryptocurrency, and Blockchain.
Unlike an average cryptocurrency or blockchain enthusiast, the space appeals to me, and I will discuss what I find fascinating about the space in this article. Before diving deep, let’s have a background of cryptocurrencies, the journey to decentralized finance, and the rediscovery of money.
What are cryptocurrencies, by the way?
In its simplest definition, Cryptocurrency is the new invention of money. It is not out of place to call Cryptocurrency the future of money as it is posed to redefine and discover the misfit of the current monetary and economic system. Technically, Cryptocurrency is a form of digital currency powered by a peer-to-peer, transparent, permissionless, and democratic network called blockchain and other emerging technologies to achieve trustless, secure, and decentralized transactional obligations.
Cryptocurrency, through its default technology, allows the removal of counterparty risk. If truly attained, cryptocurrency will be the purest, fastest, soundest money, re-imagined from the ground up. Cryptocurrency dismisses that cryptography, as seen in fiat and conventional currencies, is enough for a perfect monetary and economic breakthrough. It also highlights the true nature of trusted third parties as security holes. Through the above revelation, Satoshi, in the famous Bitcoin invention, implements a computational proof of historical events, called a distributed ledger, to build up an incorruptible history without relying on trust.
Bitcoin brings Cryptocurrency to the fore. However, Wei Dai, in a paper, in 1998 on “b-money, Nick Szabo’s description of “bit gold” and Hal Finney’s reusable proof of work (RPOW) system in 1998 showed that Satioshi’s famous Bitcoin white paper of November 2008, isn’t the first use of Cryptocurrency. While Wei Dai’s B-money is the first known use of Cryptocurrency, Bitcoin is the first implemented decentralized Cryptocurrency. Due to the growing acceptance, researchers and developers found interest and have invented more and more today. As of the time of writing, there are now thousands of cryptocurrencies, as shown on CoinMarketCap, self-described as “the world’s most-referenced price-tracking website for crypto assets.”
Top 6 Reasons to Bet on Cryptocurrency
One must have found a gold mine or a silver hub to bank on to make a bet. Similarly, betting on Cryptocurrency should be for some well-evaluated benefits or potentials. Cryptocurrency represents the future of finance and thus offers the following opportunities;
It Allows programmable currencies and encrypted technology
Cryptocurrency, also called programmable money, allows users to tokenize and democratically share value in a peer-to-peer network. Irrespective of the asset, including real estate, arts, goods, etc., cryptocurrencies allow users to create securities and utility tokens of users’ assets. The assets can as well be traded on a global scale through cryptocurrency exchanges. However, users should do due diligence in their choice of exchange to ensure choosing regulated, licensed, and zero-fee exchanges like Fassets to ensure no jurisdictional issues and breaches of the policy.
Also, the cryptocurrency-backed technology, blockchain, allows the encryption of users’ assets in cryptographic hashes, thanks to tokenization and supportive algorithms.
Permissionless and self-custody
The departure from fiat to Cryptocurrency is large because of third-party control and censorship. Since Cryptocurrency allows a “don’t trust but verify” model, people can transact without permission from a third or central network, provided they are within the framework of the distributed ledger technology, DLT, first experimented with by Satoshi Nakamoto in his novel Bitcoin invention. The system encrypts and automates transactions seamlessly without third-party interference.
The phrase “cryptocurrency is permissionless and allows self-custody” means that users can become their own banks. Ideally, once an asset is deployed on the blockchain network, users can decide to become their own bank by owning their private keys and routinely trading on regulated exchanges like Fasset.
Ledger, BC-vault, Exodus, and SafePal are top self-custody device providers. Unlike centralized assets, users can manage their assets, using any of the non-custodian wallets except when they want to transact.
Overcome double spending
In traditional finance, TradFi, people can send money or pay others who need help to verify the status in real time. The inability to verify in real-time often results in double spending since the sender can pay and further call back their transactions. Also, the receiver can deny receiving any payment. However, blockchain, the cryptocurrency-backed technology, operates an immutable, transparent system that allows a real-time verification of transactions. This way, users don’t trust but verify every translation on the blocks.
Decentralized and distributed principles
Decentralization means having no central control and being censor-resistant. By default, conventional financial systems operate a centralized transactional model where a set of entities make decisions for the community and control what happens to the network. In that case, a few can crash, destroy or rug pull a network. Although there are ongoing hacks, shutdowns, and interferences in the cryptocurrency space, such as FTX, LUNA, and others, it is based on ethical issues and due to the Nascent state of the space.
However, Cryptocurrency is decentralized by default and is somewhat centralized by exchanges trading them. While I am bullish on the decentralized principles of Cryptocurrency, I suggest more research to improve the level of decentralization, uniformity of nodes, and regulations of the centralized exchanges. So far, only a few exchanges like Fasset have adopted regulatory and jurisdiction policies to make Cryptocurrency safe and not illegal.
Privacy and data monetization
Centralized companies or networks sell users’ data for profit, but decentralized networks like cryptocurrency networks reward users for their data, yet it remains a personal asset. For instance, in 2020 and recently, Facebook, like other centralized bodies, was fined $1b and $3M for data breaches. These companies realized that data is the new oil, as it is an endless revenue stream once obtained. That way, they go out to obtain users’ data through fraudulent means. This data is often misused against owners’ wishes, and they thus create security, provenance, and privacy challenges that often endanger owners. However, instead of collecting and monetizing your data to the highest bidder, Cryptocurrency rewards you for your data.
The blockchain employs end-to-end encrypted technologies to address users’ data compromise. Also, the network ensures users don’t manipulate their data once logged into the system. Using its immutable ledger technology helps establish data provenance in an unalterable way. Through blockchain’s cryptographic principle and immutability, data can be private and rewarding to users and the network. That way, Cryptocurrency offers more features than fiat. Examples are China Unicom, Kalima, etc.
Smart contract and inclusiveness.
The smart contract, a set of self-executing rules, provides inclusiveness of Cryptocurrency beyond payment. According to Eric Schmidt, a former CEO of Google from 2001 to 2011;
“the ability to create something which is not duplicable in the digital world has enormous value … Lots of people will build businesses on top of that.”
The above quote speaks about the inclusiveness of Cryptocurrency and its backed technology, blockchain, using smart contracts. With a set of computer codes, users can set rules governing an ecosystem and, as such, use Cryptocurrency, the native currency of the network, to secure, democratize and automate agreements and decisions. From here, DAO and governance models in a decentralized system become realistic.
Conclusion
Cryptocurrency is the future of money and will redefine how transactions are done as soon as it achieve mass adoption. The question is when would it materialize the said potential; however, it is a matter of time, but in waves. Having taken a close look at the cryptocurrency and blockchain space, one could be excited about the technology features, such as allowing programmable money, inclusiveness, self-custody, data privacy, and user data monetization.
