Can cryptocurrencies actually benefit the global economy? While crypto assets have long been deliberated upon and criticized by many, the truth is that they can prove to be useful financial tools.
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Cryptocurrencies have the power to trigger both social and economic growth the world over, even in developing nations, because they offer easier access to financial services and capital for everyone.
How Cryptocurrency Can Boost The World Economy:
Both the Bitcoin and cryptocurrency on whole have much utility for the world economy, albeit in a disruptive way.
In spite of the negative opinions of critics and the disruptive technology called the blockchain, there has been much anticipation that these can eventually interfere and change the ways in which the traditional financial systems are operated.
Growth:
There is an already-emerging industry centering on crypto assets and there are institutions meant for supervising all such crypto exchanges.
The growth rate of this industry is mind-blowing and this fact can be supported by people who had adopted such crypto assets earlier and have turned wealthy overnight.
For instance, the Bitcoin was the first cryptocurrency to make its appearance a decade ago and since then many Bitcoin investors have flourished and have even started to depend on this crypto asset for their sustenance.
Trading Bitcoins has also become the key source of income for many traders.
The automated trading bots like bitcoin revolution have considerably increased the trade of bitcoins.
So, the world economy is gradually but steadily shifting towards adapting to such requirements and cryptocurrencies appear to have the power to satisfy most of these needs.
Useful for UnBanked Populcation
Cryptocurrencies can prove to be a boon for the unbanked population in poorly-banked countries.
The truth is that almost a third of the global population cannot access basic banking services. So, when there is a crisis, they are helpless.
Since such people are already at a disadvantage they try to resort to dangerous lending practices.
Interest rates of such practices are obviously very steep and this only leads to more economic instability for those who requested for loans.
Here a crypto asset can prove to be useful because of its ease of use and high volatility.
Since the crypto coins are decentralized, trading is possible without any third party or intermediary and across borders without any restrictions.
Don't Need Physical Location
Cryptocurrencies do not need a physical location for them to exist.
This is why the transaction costs are so less.
You will not need to recruit employees or pay their salaries, pay for rental expenses and utility bills; so, all these savings culminate in lower transaction fees.
This is also why more and more individuals are putting their trust into these new financial tools.
The higher the number of people engaged in transactions the closer the global economy will be intertwined.
Transparent Transactions
Transactions made through the blockchain network are transparent.
As all transactions are digitized and automated they can be tracked through distributed ledger.
So, this ledger cannot be manipulated either by the companies or people and risks of frauds or corruption is automatically minimized.
Another benefit is that this will give underdeveloped countries the chance to enter this crypto world to boost their own economies and social prospects.
Citizens of a state will know exactly where the state funds are being allocated and this will give them a stronger say in governance.
Payments in Multiple Currencies
With the blockchain technology becoming popular businesses can now get their payments in multiple currencies.
This makes it a prosperous time for entrepreneurs as a whole; for instance, BitPesa enables Africa-based business owners conduct financial transactions with Asian and European nations.
So, cryptocurrencies can make it possible for small or medium-sized businesses to enjoy better financial coverage.
Entrepreneurs can now convert altcoins into traditional fiat currencies quickly and then redirect this capital into further business investments.
The world is fast changing and the speed at which this change is happening can tell you that the traditional financial institutions will feel the pinch sooner or later.
New financial needs are surfacing and these must be addressed in time.
The world is feeling the need to tear down political borders to find a comprehensive financial system.
And the blockchain technology can give the world exactly what it needs.
Role Of Bitcoin:
There was a time when people felt that the Bitcoin would fail to create any impact on global economy.
But these people have now been proved wrong after a decade.
News concerning crypto assets like the Bitcoin is everywhere and many investors, governments, and companies, are showing an active interest in adopting the blockchain technology.
These are only some of the ways in which Bitcoin is playing a pivotal role in the world economy.
Eliminates third parties
To start with, Bitcoin eliminates third parties and intermediaries, unlike traditional currencies.
In Bitcoin transactions, users of the currency verify the transaction instead of a bank or governmental institution. Banks are obviously worried as their services are no longer being needed.
Because there are no middlemen involved, transactions are also much faster.
No Relation with USD
USD acts as a reserve currency for the entire world economy and all mainstream transactions happen in relation to it.
So, the US dollar has been the main strength behind American global power, allowing it to place sanctions on other nations.
But crypto coins have no relation to the USD offering financial actors a new way to take part in the world economy, circumventing US economic policies.
For instance, Venezuela has come up with a crypto asset backed by its oil supplies, in a bid to evade sanctions.
Bypass the traditional ways
With crypto assets, entrepreneurs have also got the chance to bypass the traditional ways of raising funds.
Instead of trying to win over banks and venture capitalists to fund their projects, they can now go around the regulations or red tape to establish an ICO.
Problems with Cryptocurrencies
The basic problem with cryptocurrencies is that they are hard to regulate since they are anonymous by nature.
This is why the Silk Road fiasco happened and people were buying illicit items on this marketplace.
Finally, the FBI had shut this down but it was followed by many more scams.
People are trying to avoid paying taxes by using cryptocurrencies and this is what has got governments worried.
So, you can expect governments to develop either their own crypto coins or impose stricter laws on the existing cryptocurrencies like the Bitcoin.
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