In ancient times, people used to pay for things with other materialistic things. For instance, a pair of shoes would cost them a chicken. Over the years, payment methods have taken many forms. From paying with materialistic things to payment with gold/silver, the concept of money was introduced. Nowadays each country has its own currency and there are so many payment methods such as credit cards and checkbooks. But the talk of the town is cryptocurrency.
What is cryptocurrency?
A cryptocurrency is a new form of digital money. You may say “We can pay online using non-crypto currency too. Why should we use cryptocurrency?”. Yes, you can pay online using non-crypto currency but that's not quite the same as how cryptocurrency works. The world’s current money system has a lot of problems:
- Transactions are slow and expensive due to middlemen such as banks and brokers taking a cut.
- Centralization of money causing financial inequality.
- Half of the population is unbanked and can’t access financial services.
Cryptocurrency can solve all these problems. Cryptocurrency relies on a technology called Blockchain. We can get rid of banks and other centralized middlemen with the help of cryptocurrency.
Benefits of cryptocurrency
- You are in charge: Traditional currencies such as the U.S Dollars have value because the government says so. It doesn't matter if you have millions in your account if the government decides to freeze your account, you are no better than a beggar on street. The government has no power over cryptocurrency.
- Negligible chance of Inflammation: Sometimes when governments are faced with serious economic problems, they simply start printing more money which can cause inflammation, and the value of the currency may take rock-bottom. It's like putting a bandage on a broken leg. It may cause more harm than good. Cryptocurrencies have a limited set of coins available, there is no easy way to simply create more coins.
- No need for middlemen: With each transaction we make, middlemen like banks take a cut. Cryptocurrency has no middlemen so, there are no cuts or hidden charges.
Risks of cryptocurrency:
There is a famous saying in Urdu which roughly translated means, “Where there is a flower, there are thorns”. Cryptocurrency comes with a set of its own risks.
- Volatility: In 2017, the price of most major cryptocurrencies, including Bitcoin, skyrocketed above 1,000 percent and then came crashing down. This up/down cycle may cost you a lot of fortune.
- Scams: Today there are around 1600 cryptocurrencies. Some of them may be a scam. For example, there was a cryptocurrency called Onecoin. It was supposed to a competitor of Bitcoin and people around the world invested so much in it. But in the end, it turned out to be a scam, and in 2017 the owner of Onecoin vanished with all the money.
