Rise of the cryptocurrencies
Cryptocurrencies are gaining popularity every day, especially since prices increased rapidly at the end of 2017. The following article is listing the benefits of cryptocurrencies and explaining the technology that is making them a success.
One of the biggest advantages of many cryptocurrencies is their decentralized structure. In contrast to conventional money, there are no centralized organizations such as banks and agencies that supervise a currency. Central banks are substituted by individuals who are able to create more money. In other words, Bitcoin, Ethereum and others are giving you access to a new financial model, which can be very appealing in times of economic and financial crises.
This virtual money also offers protection against inflation. Every cryptocurrency is based on a fixed algorithm, which limits the number of monetary units available to a certain fixed number. Money cannot be multiplied randomly and therefore no inflation can occur. That is also why cryptocurrencies are often compared to gold and silver.
What also differentiates cryptocurrencies from their competition is the speed of completing transactions. Transfers are finalized immediately, and even worldwide transactions are completed in just a few minutes, as opposed to the traditional system. Furthermore, the system is working 24/7. This means that you are able to transfer money instantly at any time of day. Even though the costs of money transfers differ depending on the technology and currency used, transferring money with the help of cryptocurrencies is in many cases still cheaper than transferring money the traditional way. It does not matter if your payee resides in Germany, Europe or anywhere else in the world. By choosing the right cryptocurrency, you can avoid high transaction fees that can occur while using traditional methods, such as credit cards.
Staying anonymous while completing transactions is another significant advantage of this new financial model. By using a coding mechanism, no personal data is exchanged between the two parties. This mechanism also guarantees security because it ensures that it is impossible to manipulate a person’s capital. This means that you are able to conduct anonymous but also secure payments.
Last but not least, the virtual character of cryptocurrencies can be seen as an advantage. There are no physical coins and bills. You can access your assets at all times and at any place, as long as you know your private key. Even a stolen phone or a broken PC are not a disaster. In contrast, if you lose cash, there is no going back.
Advanced technology is the main factor that makes cryptocurrencies a success. Every transaction needs to be verified and then stored securely. This mining process is not carried out by banks but by a network of individuals. Data from transactions is stored in blocks that have to be confirmed and saved. Miners use an algorithm to transform these blocks into hashs, which represent a certain combination of letters and numbers. Afterwards they are stored in a digital database which is called blockchain. During this process new monetary units are created and kept by the miners. Everyone with access to a computer is theoretically able to participate in the mining process. However, the needed processing power is immense and that is why miners often join forces and create mining-pools. Together they are able to offer more processing power and share the profit afterwards.