While some people hold on steadily to the fact that electronic money/cryptocurrency/digital currency is not real, its value continues to increase. As this is happening, futuristic questions such as “Would bank accounts become obsolete?” or “What is the future of monetary policy?” has also come up as these digital currencies grow.
For example, Bitcoin was created as independent, computerized money in 2009 to provide a stark alternative to government-issued currency held at banks and it has received a warm reception since then as it has found a way to creep into the economic system.
Over the years, a lot of questions have surfaced to question the validity of Bitcoin and other emerging digital currencies, but despite this controversy, a lot of people are obviously still largely investing in digital currencies. The question that this however poses is “Why is Everyone Rushing towards Electronic Money?”
In light of the above, here are a few reasons why investors are embracing electronic money:
It is owned by everyone
Cryptocurrency has similar functions to any basic traditional, national currency only with a few fundamental differences. Cryptocurrency does not stand for debt, it strictly represents itself, and its value is determined by what someone is willing to trade for it. This decentralized nature plays an essential role in how its currency value is determined and is one of the major reasons why there is an influx of investors.
Electronic money/digital currency is not exclusive to anyone and this protects it from being exposed to human manipulation and corruption. Decentralization allows it to operate on a “distributed ledger” or a shared transaction list and this makes it attractive to investors.
It is almost impossible to forge
Cryptocurrency operates on a blockchain, which is the distributed ledger earlier mentioned. Understanding the technology helps you understand why this is the key to the power of digital currency.
This blockchain is composed of chunks of encrypted data and it is a public database in which blocks are stored and sequentially related to each other. This means that forging it would be very virtually impossible.
Cryptocurrency transactions are mostly confidential
For traditional currencies, you can privately transact or pay for something in person using physical cash. Large withdrawals of physical cash are quickly flagged and reviewed by a central authorities like governments and financial system regulators.
In the actual sense, monitoring large cash transactions is not a bad thing in itself. It upholds the legitimacy of the currency and deters criminal enterprises like money laundering. But electronic money is different in that it depends on well-designed math to track the exchange between two people or companies. While the ledgers of traditional currencies are publicly viewable, cryptocurrencies are held electronically in digital wallets and confidentiality is very paramount.
Its security grows through time and value
In the early days of cryptocurrency, it was easier to gain the majority of control as the cryptocurrency network itself was much smaller. The smaller the network, the more vulnerable it is to hacking. For more established cryptos like Bitcoin or Ethereum, the cryptocurrency networks are so big that a hack understanding is mostly impossible.
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