The emergence of the digital world has brought great changes that have transformed the way of life of people around the world, and a clear example of this is a cryptocurrency, a model of virtual money that has become an important alternative to the financial system.
According to many experts, cryptocurrencies are the digital equivalent of cash. A banknote is a bank note issued by the central bank of a country to facilitate trade and business in general, a virtual currency is the same, but without the central bank and without the tangible document.”
The cryptocurrencies are based on blockchain technology (Blockchain), which is essentially a public accounting book, immutable and easily verifiable by all users of that technology.
Experts also say that the same inalterability of the chain of blocks makes it an exceptional source of confidence for the records that are stored in it, and profiles it as a new disruptive technology capable of substantially changing the dynamics of the sectors of the global economy.
Due to the fluctuations to which the cryptocurrencies are subject since they are not backed by any central bank, it is estimated that their use will substantially influence the economic reality of the business since as it gains popularity it will become a new form of payment of high versatility.
Also, because of their natural condition of not being subject to border restrictions or exchange rates between countries, from a virtual wallet you can make the payment of some bananas in Brazil, a video game in Japan, or a house in Los Angeles, in the United States.
In Colombia as well as in other countries, virtual currencies have been very well received and accepted, so much so that in 2017 it ranked number 3 worldwide in the list of countries where cryptocurrency transactions grew the most.
For instance, on the Localbitcoins website, cryptocurrency reported growth of 1200 percent in 2017 for Colombia, a percentage exceeded only by China and Nigeria, with 2000 percent and 1400 percent, respectively.
Not being subject to legal and border restrictions, cryptocurrencies are established as natural stimulants of international trade and the advance of the Colombian economy towards global integration.
You Need to Know About Cryptocurrency
Exchanges of Cryptocurrency
There are now big numbers of exchanges where people go to trade. That is to sell and buy cryptocurrencies. These exchanges are growing in numbers. New ones like Errna will offer a user-friendly interface that will allow newbies to navigate through the platform with less effort.
Advantages of Cryptocurrency
Its name comes, precisely, from the encryption that makes it almost impossible to decipher its code and which, in turn, is divided into many communication nodes (usually between 20 and 40). Nowadays, it is a technology that cannot be hacked.
They allow transfers of money from one part of the world to another. Some of these may be instantaneous, but not all. For example, cryptocurrency can take up to 200 minutes to process operation.
Confidentiality is maximum since the minimum amount of necessary information is transmitted.
In turbulent countries, where the local currency loses a lot of value, it facilitates the saving and importation of goods in case the exporter prefers not to charge in his currency. This utility favors, above all, countries where it is almost impossible to get a strong currency.
Disadvantages of Cryptocurrency
Its opacity is one of its main defects since many illegal and money laundering activities can easily be carried out through cryptocurrencies.
The enormous volatility that it has, for example, the value of Bitcoin went from five cents to a maximum of 20,000 dollars in a single year, and then lost 60% of its value in a few weeks. This makes it impossible to set prices or save in the long term with this currency.
The absolute lack of regulation in many countries makes them “legal”. It takes a huge international effort to regulate these assets.
The electrical consumption is a problem. Companies that register these assets, such as cryptocurrency, have to solve mathematical enigmas that involve many hours of computer processing. It is estimated that processing a bitcoin can cost between $ 3,000 and $ 6,000.
They have a very scarce use in the real economy. Currently, the use of these cryptocurrencies is limited to a very small group of people and companies. As they are not backed by any central bank, their value will be based only on the use they may have.
In conclusion, we are in an incipient moment of the development of cryptocurrency. Although they have many advantages, they suffer from a huge lack of legal guarantee, which must be overcome in order to become a reliable financial asset.
However, do not be fooled: blockchain technology is here to stay. It is very likely that in the future, cash payments will be minimal and central banks will bet on technologies similar to those of cryptocurrency. In this way, many of the current cryptocurrencies will disappear, leaving only those that prove their usefulness and employability for international transactions, especially in countries with weak cryptocurrencies that most require them.
In the meantime, the acceptance is increasing and more people and gathering at cryptocurrency exchanges to do transactions. As I said, new exchanges are coming to the scene, giving more options to people.
In conclusion, cryptocurrencies are embracing many fields now beyond finance. More ICOs (Initial Coin Offerings) are launched every week aiming at different purposes. The years to come are going to be bathed in blockchain technology as it continues to change the world.