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Recently, cryptocurrencies and bitcoins have become the main topics in the financial sector. A cryptocurrency is a digital or virtual currency that uses cryptography for security reasons. Because of this security feature it is difficult to fake a cryptocurrency. A distinctive feature of a cryptocurrency and probably its most captivating attraction is its organic nature; it is not issued by any central authority, making it theoretically immune to government interference or manipulation. Cryptocurrencies have their advantages and disadvantages. The document elaborates different aspects of cryptocurrencies, starting from their initial development, challenges and risks, opportunities, advantages and disadvantages and their future. Furthermore, the document dealt with questions related to the practical and technical function of cryptocurrencies. It is concluded that it is not easy to predict the future of cryptocurrencies as there is a lot to be done, especially in the field of formal regulations. However, banks and other financial institutions should see and consider cryptocurrencies as an alternative for financial transactions in the future.
Faster and cheaper payment solution
Bitcoin transactions can occur at any time, are fast and have lower rates. The average Bitcoin transaction is executed in 10 minutes with commissions for simple P2P transfers to remittances that are less than 1%. This is largely due to the fact that traditional third-party financial institutions such as banks are removed from the transaction process. Traders and individuals using bitcoins are not held back by bank schedules, withdrawal limits or long periods of transaction execution before funds become available.
Safeguards against currency manipulation
Bitcoin is not owned or controlled by a country or government agency. Moreover, unlike many other forms of currency, the number of bitcoins that will be issued is over, exactly 21 million. The advantage of this lack of ownership and the limited quantity is that the supply of bitcoins can not be artificially manipulated. When it comes to fiat currency, governments can easily print additional coins or coins, devaluing existing cash and causing inflation. The decentralized nature of bitcoin reduces monetary concerns and mostly leaves valuable fluctuations up to the natural supply and demand economy.
More consumer protection
The use of bitcoin as an alternative to fiat currency protects the negative side that can occur with traditional bank accounts. This includes the threat of bankruptcy or creaming. In the event of bank failure, a customer may face frozen bank accounts while settlement plans or bailouts are eliminated. In some countries, customers of traditional banks may even find that banks scrape money from customer accounts to remain solvent. This happened during the banking crisis faced by Cyprus in 2013. With bitcoin, people remain in full control of when and how their assets are recovered, transferred and spent. Essentially, digital currency users become their bank.
Greater transparency
Because all bitcoin transactions are permanently recorded on the blockchain, all sales are public and traceable. The balance associated with each address is also part of the public record. Blockchain makes bitcoin much more transparent than many other monetary systems.
Private and secure
Although all the details of bitcoin transactions are publicly stored on the blockchain, the identities of the users involved remain relatively anonymous. Because payments can be made without including personally identifiable information, Bitcoin provides intrinsic security against identity theft. Moreover, there is no risk of being charged twice or of fraudulent charges assessed to the wallet thanks to the blockchain, which monitors the exclusive coin addresses and eliminates the possibility of paying more people with the same bitcoin. Bitcoin does not offer complete anonymity of cash, but it is undoubtedly a much more private experience than payments or online transactions that use debit or credit cards.
Final thoughts
Bitcoin is currently the most valuable and widely adopted digital currency. An increasing number of companies, charities and other organizations accept bitcoin payments ranging from electronic retailers to law firms to sports concessions. Furthermore, the recent inflationary and banking crises around the world have highlighted some of the critical threats inherent in the legal currency. This creates further opportunities for decentralized digital currencies. Education will be essential to increase The acceptance of Bitcoin and the use of merchants, institutions and individuals. The system will also have to address common critiques of illicit bitcoin use and work diligently to build regulatory and legal frameworks around the world.
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