Knowledge Guide for Beginners: Cryptocurrency Benefits
Cryptocurrency is a new asset class that came into existence in 2009 with the launch of Bitcoin’s blockchain. As with most cryptocurrencies based on blockchain technology, the primary advantage of Bitcoin and similar cryptocurrencies is the lack of a centralized authority, payment processor, or corporate owner.
On the other hand, peer-to-peer networks allow users to transact with one another directly. The decentralized and peer-to-peer nature of cryptocurrency provides several other advantages. The advantages of cryptocurrencies will be discussed in this article.
Transactional Freedom
Crypto is useful for exchanging value between parties. This makes the transaction freer and censorship-resistant.
Banks or payment processors can cut off service for any reason. This can be challenging for journalists, dissidents, and others in harsh governments. Because Bitcoin and most other cryptocurrencies have no central authority, stopping their use is hard.
24/7 Markets
In the case of the New York Stock Exchange, the market is only open on weekdays from 9:30 am to 4:30 pm Eastern Time (NYSE). Most traditional financial markets are closed at night, on weekends, and on holidays.
Cryptocurrency markets, on the other hand, are open every day of the week, 24 hours a day. Only a power outage, internet outage, or failure of a centralized exchange could stop an individual from trading cryptocurrencies.
Cross-Border Payments
Nation-state boundaries don’t matter when it comes to cryptocurrency. A person in one country can easily send coins to a recipient in another country. Getting money across international borders can take a long time and be expensive when using standard financial institutions. It may be impossible to do so because of legislation, penalties, or conflicts between countries.
A More Inclusive Financial System
People without traditional financial access can gain from cryptocurrencies. Because cryptocurrency is decentralized and permission-less, anyone can participate.
No financial authority or government permits crypto usage. China bans Bitcoin mining. No bank account is required. There are billions of “unbanked” people who don’t have bank accounts. With crypto, anybody can become their own bank with just a smartphone.
Portfolio Diversification
Consequently, cryptocurrency has been designated as a non-correlated asset class. The price movement of cryptocurrencies is largely unaffected by the same factors that drive traditional financial markets like equities, bonds, and commodities.
If a crypto coin has gained millions of percentage points in just 12 years, it is apparent that it is not tied to any other asset. In recent years, however, cryptocurrencies have begun to trade alongside stocks for brief periods of time.
Inflation Hedge
The limited supply of Bitcoin, Litecoin, and Monero, to mention a few, has led to speculation that they could be good inflation hedges. Because of monetary inflation, which occurs when governments and central banks generate more money, the value of scarcer goods rises.
The price of these fixed-supply coins, measured in dollars, is more likely to rise as more new dollars chase fewer and fewer coins. In addition, the Bitcoin system, for example, is designed to keep those coins in short supply independent of the monetary policies of the time.
Outsized Returns
For the past 12 years, Bitcoin has been one of the best-performing assets. Bitcoin started off worthless in 2009. In the years that followed, it rose to a fraction of a penny, then tens of thousands. This is a million-point gain. S&P 500 equities return roughly 8% annually.
Some altcoins have exceeded Bitcoin by huge margins, yet many eventually collapsed. These may be the most popular cryptocurrency gains. Losses may be the most well-known downside. Volatility in crypto pricing has benefited day traders and speculators.
More Private Transactions
Cryptocurrency’s privacy benefits are overstated. Each transaction that takes place on a blockchain is added to a public ledger. This ledger just reveals wallet addresses, but an observer can trace transactions by linking a user’s identity to a wallet.
Most crypto transactions are pseudonymous, but you may make them more anonymous. Coin mixing services bundle transactions together, misleading outside observers. Full node operators make their transactions more opaque because observers can’t identify if they submitted the transactions or someone else.
These are advanced methods that may be difficult for crypto beginners. While total anonymity isn’t one of cryptocurrency’s key benefits, transactions are still more private than with fiat currency and third-party payment processors.
Short Settlement Times and Low Fees
The possibility to use cryptocurrencies as a means of exchange may be attractive to certain investors who are only interested in profiting from an increase in the value of their cryptocurrency holdings.
Transactions involving Bitcoin and Ether can cost as little as a nickel or as much as several hundred dollars. There are other cryptocurrencies that can be exchanged for cents or less, such as Litecoin, XRP, and others. Most crypto payments are settled within a few seconds or minutes. It can take up to five business days for a wire transfer to clear at a bank.
Exponential Industry Growth
In our lifetimes, the cryptocurrency business has been one of the fastest-growing markets. It’s fair to say that being involved now is akin to being involved with cutting-edge internet startups in the late 1990s and early 2000s. In 2013, the bitcoin market had a value of approximately $1.6 billion. By the end of 2021, it would have climbed to over $1.4 trillion.
Easy Transactions
Cryptographic transactions are characterized by their simplicity, low cost, and greater privacy than most conventional means of exchange. Anyone can send and receive a wide range of cryptocurrencies using a simple smartphone app, a hardware wallet, or an exchange wallet.
Bitcoin, Litecoin, and Ethereum are some of the cryptocurrencies that may be purchased through a Bitcoin ATM with cash. Using crypto doesn’t always necessitate the use of a bank account. Using cash, a person may buy bitcoins at an ATM and then transfer them to their mobile phone. For people who don’t have access to the old financial system, this could be one of the most significant advantages of bitcoin.
Incredible Security
Decentralized cryptocurrencies tend to be safe payment methods because to their reliance on encryption and blockchain security. To some, this might be the most certain benefit that cryptocurrency offers.
There is a strong correlation between the hash rate and cryptographic security. The extra processing power is required to breach a network with a high hash rate. Because it has the highest hash rate of any network, Bitcoin is the safest cryptocurrency.
If you’re going to use cryptocurrency, you’re going to have to trust the exchange. Cryptocurrency exchanges and individuals are the most common targets of hackers.
Bottom Line
The aforementioned are just some of the most significant benefits that come with using cryptocurrencies. Of course, there is the possibility that there are drawbacks as well, the most significant of which is its volatility. Before getting engaged in the cryptocurrency market, anyone who is interested in buying, selling, or trading cryptocurrencies would be prudent to conduct their homework, as is the case with anything else.
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I'm Carina, a passionate crypto trader, analyst, and enthusiast. With years of experience in the thrilling world of cryptocurrency, I have dedicated my time to understanding the complexities and trends of this ever-evolving industry.
Through my expertise, I strive to empower individuals with the knowledge and tools they need to navigate the exciting realm of digital assets. Whether you're a seasoned investor or a curious beginner, I'm here to share valuable insights, practical tips, and comprehensive analyses to help you make informed decisions in the crypto space.
