Cryptocurrencies are one of the most revolutionary and disruptive innovations in the world of finance. Assumptions regarding the impact of cryptocurrency on the economy once served as fodder for the doubts and uncertainty regarding crypto. Digital money has shown the potential for transforming the financial sectors with notable advantages for lower-income countries alongside emerging markets.
Most important of all, decentralized and inexpensive access to financial services through digital platforms can open up the doors to banking for around 2 billion people worldwide. In addition, cryptocurrency or new forms of digital money can also help reduce barriers to trade between countries while facilitating new opportunities for market integration. What are the other benefits of cryptocurrency on the economy, and how will they help? The following discussion helps you uncover the answer with a detailed overview of the economic impact of cryptocurrency.
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Why Bother about Digital Money?
The first question that comes to the mind of any crypto enthusiast is “which cryptocurrency has the best future” due to the lucrative appeal of cryptocurrencies. People who must have bought Bitcoin in the early days with the hope of entering the future of currencies received good returns for their investment.
Therefore, you need to understand the value behind cryptocurrencies rather than worrying about picking up the best alternative. Cryptocurrency is more than just a digital representation of value as it can be tailored into a wide range of use cases. For example, you can find the applications of cryptocurrencies as central bank digital currencies, stablecoins, and a broad range of crypto assets.
The relationship between cryptocurrency and economy becomes clearly evident from the fact that cryptocurrency represents a store of value and medium of exchange. The identity of cryptocurrencies as financial assets makes them a vital highlight in the modern economy.
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Background of Cryptocurrencies’ Impact on the Economy
Before reflecting on the impact of cryptocurrency on the economy, it is important to understand where cryptocurrencies stand today. The world has roughly over 2000 cryptocurrencies. As of 2020, almost 36.5 million people in the US alone had ownership of some form of crypto. Many cryptocurrency coins and tokens have established their foundations as viable forms of investment and currency.
You can notice the impact of cryptocurrency on different aspects of national and global economies. For example, the 2017 crypto ICO boom led to the flow of around hundreds of billions of dollars into the crypto industry. Experts have claimed that “cryptocurrency is the future” and is a viable stock for investments, more like precious metals.
How can investors ignore the volatility of cryptocurrencies? Will cryptocurrencies hold up their value and provide the desired returns for investors? It is important to note that cryptocurrencies are something different from conventional financial assets not only in terms of design but also in terms of their implications.
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Economic Impact of Cryptocurrencies
The general pointers in discussions around cryptocurrencies often draw attention towards questions like “what is the advantage of cryptocurrency” and other aspects regarding their adoption. However, a deeper understanding of how cryptocurrencies affect the economy can help you decide whether they are actually helpful for the economy. Here is an outline of the different aspects of cryptocurrencies that have a solid impact on the economy.
The first thing you would note in identifying how cryptocurrency can change the world refers to blockchain technology, the technology which defines cryptocurrencies. Various experts have predicted that the technology can open up the chances for unlocking billions of dollars. What are the reasons to assume that blockchain technology in cryptocurrencies can influence the economy? The answer points out the impact of blockchain business processes in different industries worldwide.
First of all, you would notice how blockchain has enabled cross-border transactions among financial institutions. In addition, the impact of cryptocurrency on the economy is also evident in the use of blockchain technology for maintaining accountability in financial transactions.
Blockchain can also help in streamlining many other processes, such as car leasing alongside executing smart contracts through cloud computing. On top of it, blockchain technology has also made it possible for companies such as Kodak to come up with cryptocurrency payments for their employees.
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The answers to “how cryptocurrency can change the world” also draw attention to the new labor markets they create worldwide. As a matter of fact, the popularity of cryptocurrencies has led to the rise in demand for crypto experts and professionals. The global crypto industry has many solutions, exchanges, and participants in a massive ecosystem, which needs people to manage them. Companies are gradually hyping up the demand for crypto-related job roles with over-the-top growth in crypto job listings. LinkedIn has mentioned blockchain and crypto skills as one of the leading in-demand skills sought by employers.
On top of it, the cryptocurrency and economy interplay in terms of jobs has been going on for quite a long time. While fluctuations in the crypto job market made some headlines in recent years, the interest in crypto jobs never faded away. The radical growth in the popularity of cryptocurrencies will drive growth in a number of crypto jobs. As a result, cryptocurrencies can have a positive impact on the economy with the creation of new jobs.
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Solution to Financial Instability
Confidence in traditional financial institutions such as banks has been declining gradually over the years. If you find out “what is the advantage of cryptocurrency,” then you will discover how it provides an effective tool for financial inclusion. Without any KYC or banks in between, you can access financial services easily.
The applications of cryptocurrencies can rejuvenate economies in countries with constantly underperforming domestic currencies. Cryptocurrencies can help in dealing with such scenarios where living conditions can be quite difficult due to fluctuations in the value of the domestic currency.
You can assume that cryptocurrency is the future of financial infrastructures worldwide, and it would offer financial utility without the government’s supervision. Around 2 billion people all over the world do not have access to a bank account, thereby keeping them away from the benefits of financial services.
Unbanked people often end up with dangerous financial practices such as loan sharks. However, cryptocurrencies can help streamline the economy by bringing better ease of access to financial services with cryptocurrencies. Anyone with a mobile application can access cryptocurrencies and use them in transactions through mobile or web applications.
The most important aspect of “how cryptocurrency can change the world” would point to their decentralization. As a result, people in countries with financial instability can use cryptocurrency as a viable instrument for cross-border transactions to ensure economic equality.
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Limited Transaction Costs
The transaction costs associated with Bitcoin don’t paint the complete picture of cryptocurrencies. Transaction costs for many cryptocurrency users are largely restricted to minimal portions. However, many people judge the impact of cryptocurrency on the economy by accounting for Bitcoin transaction prices. You should not think that cryptocurrencies and the underlying blockchain don’t need any physical property.
With a crypto wallet, you are ready to go with any transaction you want. Most important of all, you don’t have to pay for the rental property, utility bills, or employee wages of banks. Therefore, you can notice the stunning impact of cryptocurrencies on the economy with savings for users. At the same time, the low transaction costs also increase trust in a decentralized global economy.
One of the final highlights that showcases the benefits of cryptocurrency on the economy would refer to transparency. Financial systems all over the world have become open playgrounds for money laundering and illegal use of financial assets. Therefore, a clear audit and monitoring system for keeping details of every transaction can help in fighting these issues. However, it is important to look for ways in which malicious entities can manipulate documents and transactions in centralized systems. If you want to avoid these risks, then you need a system where you can track financial transactions on a granular level.
Cryptocurrency offers you the same with a distributed ledger that keeps track of every transaction. Most important of all, the interplay of cryptocurrency and the economy becomes stronger as cryptocurrencies are more accountable and transparent. The utility-based design of cryptocurrencies helps in monitoring the ownership and transfer of transactions.
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On a final note, you can clearly understand how cryptocurrency can change the world economy with its essential features. The benefits of cryptocurrency present some conclusive value advantages for the economy in general. For example, the popularity of cryptocurrencies and their eye-catching prices have fuelled interest in crypto as well as crypto jobs. Therefore, cryptocurrencies can influence the global economy positively with new jobs.
In addition, the impact of cryptocurrency on the economy becomes clearly evident with the technological foundation of blockchain. The strength of blockchain helps in ensuring decentralization, thereby opening up financial access to the unbanked population. From a broader perspective, cryptocurrencies are not just new financial assets but a revolution in the perception of financial assets. Cryptocurrencies have shown that economies can still work efficiently without banks. In addition, cryptocurrencies also feature capabilities for tracking transactions and maintaining accountability. Keep learning more about cryptocurrencies and the top trends.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!