From Bitcoin to Dogecoin and the new ‘green’ alternative, Chia, most of us are aware there are different types of cryptocurrency. But while mainstream adoption remains in the air, the idea of a digital or virtual currency is still intriguing. So, what makes cryptocurrency an important point for discussion?
Cryptocurrencies are decentralised
Cryptocurrencies are not controlled by any one government or bank. In contrast, governments control most other fiat currencies, aided by banks and economic policy.
As such, digital (crypto) currencies challenge us to think about what money actually is. After all, fiat money really only exists because we all buy into the idea that it’s worth its face value.
The interest surrounding cryptocurrency and the fact that new currencies continue to appear, reveal a desire to question the status quo and, potentially, the relationship between money, government and power.
Cryptocurrencies are efficient
Users can exchange currency directly between themselves and don’t have to rely on third parties like money exchanges. Not only does this make transferring money more efficient in terms of speed, but it also removes associated transfer fees.
And because cryptocurrencies are not controlled by banks, anyone can be a potential user. This is significant as figures from the World Bank reveal that as of 2017, nearly two billion adults did not have access to a bank account, which can lead to long-term financial instability and compound wealth inequalities.
Cryptocurrency technology has many uses
Cryptocurrency as a concept and means of payment has the potential to change and reshape our relationship with money. But it’s the technology behind many of them that is of particular importance.
Bitcoin, like several other types of cryptocurrency, uses blockchain technology. Think of blockchain as a giant database, but one that can’t be manipulated. Data in the blockchain must be authenticated before it can be ‘cemented’ in a block. If an item can’t be verified, it won’t be included.
Blockchain is considered incorruptible. As such, it can be used for activities where transparency is key – like elections. In this example, the blockchain can store voter details with votes matched up to ensure fair balloting.
The fact that data can’t be stored unless it’s verified is an exciting step forward for databases as a whole. This includes healthcare, insurance and government data.
Blockchain is also the tech behind smart contracts. Here, when one stage of the transaction is complete, it triggers the next stage. This self-automation cuts the burden of admin, resulting in more efficient logistics. This can be vital in supply chain management and even in allocating aid after a disaster.
What’s next for crypto?
But whatever the future holds for cryptocurrencies, the tech that drives it is highly likely to stick around. Because ultimately, blockchain has the ability to increase transparency and revolutionise the way we store and manage data.
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