Are Cryptocurrencies Actual Currencies?

Cryptocurrency is a now a legitimate buzzword, and it’s quite interesting to know what people think about it. Unlike blockchain, whose meaning people are still struggling to explain, cryptocurrencies are more associated with the money, just in a digital form. More so, if we’re talking about coins — it’s money, but programmable. And it doesn’t mean that a casual user can’t grasp it; instead, everyone can now take control over this currency, granted that they know how to manage it. Bitcoin (even though it has significantly fallen for the past few months) and Ethereum (which is worth much less than Bitcoin as for now) are the two largest currencies and have already attracted countless users who were previously unaware of cryptos as a whole.

But why is it so that people deem CC easy-to-grasp? Well, although it’s surrounded by numerous programming terms, the whole concept is all about two terms: coins and tokens.

Both are cryptocurrencies but the main difference is that a token allows you to be a part of the project’s network: you get its share and access to certain functions that can be used exclusively within a certain ecosystem.

Coin, on the other hand, is more like a digital currency that allows you to buy certain things thanks to being integrated into numerous payment systems. Coins can be mined, sent, or received and are open to everyone who wants to join the network — a public-open blockchain is welcoming to anyone.The key point is: you can buy a token and other goods with a coin, but not vice versa.

There’s close to no limitations in how the coins operate; they can seamlessly replace real money and grant certain benefits when you operate within a digital realm — the lack of a 3rd party is an obvious edge when making transactions. Of course, it won’t let you buy stuff in a tiny stall or a grocery store, but you can’t find a better fit for your NET activity, given how fast it approaches the payment systems market. While cash is becoming obsolete and we’re just years away from it disappearing, at least from the most developed countries, regular digital payments are what you could put head to head with CC to see which one comes out on top.

To showcase its practical use in our day-to-day lives, let’s view some of the common ways for the usage of this currency:

Direct Digital Payment

We often see payments as something that is tied to banks. But, first, not everyone has access to bank services, not to mention an account or a credit card. Second, there’s still a distrust towards banks from many users — even being a transparent venture doesn’t guarantee them customer love. They still depend on countless regulations that may impede smooth money flow: some transaction types are simply limited or not allowed, plus the human factor can lead to flaws when managing users’ funds: whether it’s a mistake or an unfaithful steward. Technical difficulties is another no-solution problem that simply leads to an outage of certain bank products: if the servers go down, there’s no other way than just to wait until they come back online. Weekends only add to the list of why bank services have become more obsolete over the recent years.

CC, on the other hand, is free from such flaws — you don’t have to rely on a trusted partner and can access your wallet any time in any part of the world, the physical presence is just gone.

Smart Contracts

Funnily enough, one of the smartest ways to use blockchain is… the smart contract. Cryptocurrencies are programmable, therefore susceptible to scripts — they follow conditions that are set up beforehand. To make it simple, the whole concept is all about making something that you view as a digital contract that has tons of variables. Let’s imagine that you want your relative to receive a sum of money when he/she reaches adolescence. Once both wallets get created and the money is in motion, the sender passes control over the money to an independent digital trust that will be triggered automatically when the condition is met. This eliminates the need to hire a lawyer and go through countless legal procedures, not to mention it’s scam-free — a blockchain-powered system is impartial and disburses money in time.

Image courtesy: X1 Group

Smart contracts have already taken their spot at rental, insurance, law, and finance businesses to reduce the expenses and add convenience to their users. For example, Insurtech is now at the forefront of implementing smart contracts — they allow for keeping track on countless parameters and trigger the actions based on occurred events and scenarios.

Value Safeguard

CC is now one of the safest ways to store your wealth. Not only are you free from external parties for your transactions, but the whole payment is always secured with a special approval — a “private key sign.” It means that the holder is the only person who has control over his/her money and no one else can impact the spending of it.

This is a fine scenario for residents who live in countries with an unstable economy. Take Venezuela for instance; their tragic case has spurred a lot of people to store their money outside the banks and the country is now among the leaders of CC usage. As the laws allow for confiscating wealth from individuals, CC has become a safe harbor that the government can’t reach — a private key is their best guarantee to protect their earnings.

Another crucial factor is inflation: government-issued currency means nothing if the state economy has failed. When the currency devalues and costs less than toilet paper in a week, CC is a prime way to protect the value of this wealth. Although the cost of the coins can vary as well, it’s a much safer bet since it doesn’t change as rapidly and can increase as well (basically a 50/50 chance).

Photo by Chris Liverani on Unsplash

Ukraine has also seen the force of CCs due to the recent crisis: its residents are also among active crypto users. Although their economy experienced a lesser slump than Venezuela, coins became a go-to option for those who wanted to save and multiply their wealth, especially when numerous banks lost their license or entered a turmoil phase.

It’s also great for countries that have flourishing economies. Cybersecurity is still a major concern for their institutes — banks require a lot of personal data to validate transactions. This often includes dates of birth, credit card numbers, names, and credentials that can later become susceptible to malware attacks. CCs, being free from your personal data, can function with the bare minimum of such info and protect your commerce from all types of fraud.

Microtransactions

After becoming popular in mobile business, mostly for apps and games, microtransactions have started to gain their footing in a CC world.

More and more companies gravitate towards this type of monetization: you no longer have to buy a product for full price or pay a costly subscription. Instead, you only need to pay for the small content pieces, only those that you’re interested in. Whether it’s a digital copy of a game or a media outlet that was locked behind the paywall, now you get to experience them in a free-to-use mode, but paying a few cents for your beloved piece of product. This, however, brings up how these payments should be made: when you literally need to pay a dime but the minimum fee is 25 cents — making such purchases will only make the 3rd parties happier and not the seller/buyer duo. Moreover, certain payment systems don’t even facilitate this kind of transaction: it may happen that a less than $5 purchase isn’t simply allowed, and this is when cryptocurrencies excel.

As a result, when the transactions are in a $.01-$3 range, it’s much better to use a low-to-no-fee model that doesn’t require tons of associated purchase info.

Cryptocurrencies also enable metered purchases — that’s if you only pay for 1 minute of wi-fi access in case you need to check your email instead of getting it for 1 hour. You only pay for what you need, no extras.

Storage

What if you need to store some data that could otherwise be deleted by the authorities? You guessed right, blockchain is a great choice. For example, Ethereum allows for storing smaller pieces of data, if managed properly. If there’s, let’s say, info about crimes or corruption among the higher tiers of officials, you can be sure that it will be safe and secure to be further exposed to a wider audience when using Ethereum Swarm.

You may ask, but what about CCs? Well, there’s a neat solution — just attach the info to a transaction metadata so it becomes immortalized on the Internet and impossible to track by any of the external parties. Sounds like how crime gangs used cash as a note with some text on it; now this technique became fast and secure.

Despite being somewhat costly at the beginning, some companies are almost ready to provide a decentralized way to store your files for a moderate price, just like Dropbox.

So, are they real?

With a handful of use-cases mentioned above, we believe it’s obvious that CCs offer roughly the same value when it comes to regular payments. Digitizing is the inevitable future and CCs is a step in the right direction — in the past, many were reluctant to replace cash with credit cards. Basically, it’s like an actual currency, where the only limitation is the speed of how this money is getting introduced to the payment systems; we are still a distance away from the point when you could buy any goods via CC wallet.

As for now, it’s still not the “smart money” that thinks for you on how to invest it better but a solid investment if you want to make your transactions secure. Your local bank will never mind sharing your data with the authorities, just like Google or Facebook does for research and advertisement companies, so it’s up to you how much privacy is needed.

With this in mind, the biggest advantage is that CC tackles the issues that the actual currency can’t: security concerns and transaction fees. Cybersecurity and microtransactions were among the most common buzzwords in 2018, and it looks like their impact will only grow in the future — another great reason for CCs to grow and become “THE currency” real soon.