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What is Cryptocurrency?
Cryptocurrency is a way of digital currency or online money that you are able to
exchange to use to trade, to transact, to buy, to purchase, or to sell. Cryptocurrency is
like a denomination of money. If we think of currencies, we have peso, euro, dollar,
pounds, yen and etc. Crypto is like the same, with different brands. In these different
brands, we have our top companies like bitcoin, ftx, lightcoin…
Cryptocurrencies, like Bitcoin, formerly derided as a niche pursuit of tech zealots, have
seen a meteoric rise in value in recent years. The cost of a Bitcoin increased to above
$60,000 for the first time in 2021. Varied currencies have different charms, but
cryptocurrencies' success mostly results from the fact that it's decentralized: They can
be moved rapidly and anonymously, even across borders, without the requirement for a
bank that can block the transaction or add fees. For example, in order to get around
government restrictions, dissidents in authoritarian nations have raised money using
Bitcoin. According to some analysts, digital assets serve largely as investing tools.
How can you say that cryptocurrency can be the future of finance?
A digital currency, or cryptocurrency, is an alternative payment method developed
utilizing encryption methods. By providing an alternative to existing fiat currencies, which
are vulnerable to inflation and political meddling, cryptocurrency has the potential to
completely transform the global financial system. Cryptocurrencies are backed by
powerful cryptography, adding an extra degree of protection, and are decentralized,
meaning they don't depend on any one government or central bank to function.
Additionally, peer-to-peer transactions made possible by cryptocurrencies make money
transfers faster and more effective than they would be through conventional banking
networks. Additionally, transaction fees and other expenses connected with conventional
banking are not applicable to cryptocurrencies. Finally, some anonymity is provided by
cryptocurrencies, which is advantageous for those who want to keep their financial
transactions private. By providing a secure, anonymous and cost-effective way to
transfer funds, cryptocurrency has the potential to become the future of finance.
Cryptocurrency has been touted as the future of finance due to its potential to make
traditional banking and financial transactions more secure, efficient, and cost effective.
Cryptocurrency is not a speculation or gamble–it is simply a digital asset based on
blockchain technology that can be used to make secure, near-instantaneous payments.
Cryptocurrency also has the potential to revolutionize global commerce, as it enables
merchants to accept payments from customers all over the world, regardless of their
location or currency. This could lead to a more efficient and accessible global economy,
which could benefit both individuals and businesses.
It is generally believed that the cryptocurrency industry is a developing ecosystem that is
gradually making headway on the established financial institutions of the developed
countries. Statistics show that from 2018 and the last quarter of 2020, there were 66
million more users of various cryptocurrencies. Additionally, both the public and
commercial sectors are becoming increasingly open to the idea of incorporating
cryptocurrencies into their financial transactions, such as payment processing, value
storage, and investment. Cryptography began advancing digitally decades ago, which is
when cryptocurrency first emerged. The range of encryption techniques that make
cryptocurrency networks secure and dependable for handling various transactions have
been developed and improved thanks to this technology. presently 5,000 or more
cryptocurrencies, and increasing.
Cryptocurrency is said to be becoming an acceptable finance system. Public and private
sectors now have a lot of interest in it, not to mention that it is recognised across a lot of
different sectors. So far it is said that there are both private and public sectors that are
being recognised and they have crypto as part of their central system. You have
technology-focused corporations and they are now adopting it more and more. Even with
all of this in mind, it’s true that regulations are being put into place to ensure that these
policies are going to break into space much more. Of course, all of this is very interesting
and it just goes to show how far things have come over the years. Cryptocurrency is
going to rocket as time goes on and this is going to make a huge difference to the
industry as we know it. It’s certainly going to be influential in many different sectors.
Cryptocurrency doesn’t have to have any kind of intrinsic value, but it can hold its value
in various other ways. It can be used to make a number of transactions, such as buying
goods or even services. You do not need to have a third party to make it possible. Since
the supply of crypto is somewhat limited, it’s safe to say that the shortage helps to
influence the value. You also have stable coins as well. Cryptocurrency can be attached
to various commodities, whether it is gold, oil or even other currencies. The technology
that cryptocurrency is built on would allow users and even owners to stay anonymous
during any kind of transaction.
Advantages of Crypto
1. It protects the investors from economic inflation. Inflation is a major crisis that any
currency can face. Inflation is defined as a rise in prices. The coin market cap has limited
a specific number of coins that can be generated at a time. For instance, Bitcoin can
issue a total number of 21 million coins. With its price surge, more users will be attracted
to it. But, it cannot generate coins more than this limit. So, it benefits the customers by
saving them from inflation disasters.
2. No involvement of intermediary and self-governance
The governance of one’s finances is a severe issue for entrepreneurs and business
tycoons. A central authority, such as banks, governs your accounts in the traditional
market. This leads to the involvement of a third party. Blockchain technology saves you
from this factor and allows you to control your money all by yourself. All the transactions
and trade in a decentralized finance system are generated on their own carried out
solely between two parties.
3. It is absolutely decentralized
Yes, it is true. Decentralization refers to the elimination of central governance on your
monetary activities. It is significant proof of the digital market as no department or
accountability center can keep an eye on your money.
4. It charges nominal transaction fees
It is a cost-effective method for sending money. The digital platforms charge minimal to
no transaction fees. So, people prefer sending money via digital cash.
5. It is time-saving
The transactions in the digital market are processed within seconds. Contrary to it,
banks take relatively more time for transactions across the border.
6. It is transparent
Transparency is one of the most significant benefits of cryptocurrency. The transactions
on an Ethereum blockchain network are accessible to everyone, and all the users
validate the changes made in the network. Therefore, the digital market is highly
transparent.
7. It helps the investors to gain maximum profit. Cryptocurrency enables investors to have
potential gains as the price sometimes touches skyrocketing values. But, a proper
strategy and preventive measures are required to follow before capitalizing your money
on it.
Disadvantages of Crypto
The banking industry has been abuzz with cryptocurrency for the past few years. While
many people think it will play a significant role in finance in the future, others see it
primarily as a speculative instrument for gambling. On the one hand, cryptocurrencies
are very erratic and volatile. This elevates the investment's risk compared to more
established financial instruments. On the other side, it also provides excellent
opportunity for expansion and has the ability to fundamentally alter how we manage our
finances. In the end, only time will tell whether cryptocurrencies are a permanent
phenomenon or only a fad.
1. It can lead to significant losses. Digital currency is highly volatile, which can lead
investors to considerable losses. Some techniques can be followed to play safely in the
crypto sphere. But still, it is merely a game of luck.
2. It is highly prone to the attack of scammers and hackers
Yes, it is true. Cryptocurrency shows a high propensity for attacks by hackers and
scammers. The people can take your money and run away. Hackers can also hack
online wallets and rob your money.
3. It can involve illegal activities
Since no regulations and central authority operate it, crypto can help people carry out
illicit activities. This is the reason why it is banned in most countries.
4. It is energy-intensive
The mining procedure in crypto consumes high electricity, which the critics claim is a
waste of energy.
5. It is environmentally unfriendly
Since it consumes high energy, Bitcoin uses fossil fuels to generate its own electricity. It
results in increased carbon levels in the atmosphere which is harmful to the ecosystem.
6. There is no space for human errors
The information once stored is not alterable. If a person mistakenly sends the
transaction to the wrong person, he cannot get his money back. So, there is no chance
of human errors.
The difference of the way money works between gambling and trading
A gambler does not have the same options as a trader does for limiting losses. Once the
game has begun, a gambler cannot control their losses. If you have bet $20, your whole
amount is at risk. Your losses cannot be cut to $15 or $10. On the other hand, a trader
can limit losses using a number of strategies. For instance, a trader can use stop-losses
to limit losses. If you've set your stop-loss at 95%, you can sell your stock once it drops
to 5% of the price you paid for it. Gambling prohibits such a thing.
When someone starts trading without the necessary knowledge and information, trading
will undoubtedly become gambling. If someone enters trades without using a proper,
tried-and-true trading strategy and risk management, trading will also be considered
gambling. Taking chances will undeniably result in financial loss for him or her. When a
trader is a professional, however, trading is not gambling. Every requirement for
successful trading is something that serious traders constantly strive to achieve. They
continue to be knowledgeable, reliable, persistent, receptive, and committed to their line
of work. However, gamblers are unable to consistently generate income. They rely
heavily on luck. Their role is decided by fate. Finally, we can conclude that there are a
number of similarities between trading and gambling. Nevertheless, despite all the
similarities, trading is a completely different endeavor.
Both activities benefit greatly from information because it helps people make well-
informed decisions. Traders and investors, on the other hand, have access to
information that is more easily accessible, such as income statements, cash flow
reports, financial ratios, etc. Inversely, gambling participants do not have access to such
easily accessible and quantifiable data.
Traditionally, those who engage in gambling activities and play casino games aim to
make a profit as quickly and as large as possible. But for those who work in the trading
industry, who will be pleased to be able to increase their profit gains over time and at a
steady rate, this is entirely different. In comparison to their gambling counterparts, who
are more likely to sustain larger losses as a result of the way they play, this strategy will
typically give them a better chance of securing a profit over a longer period of time.
Traders will have access to a vast amount of information, whereas gamblers will
probably not be able to obtain any of that kind of information to aid in winning a game.
Indeed, trading is deliberate and planned, whereas gambling is all about chance and
probability.
You cannot rely on gambling as your main source of income. You enjoy doing it, so you
do it. If you succeed, the money you earn is just a bonus. You make bets on the future
success of companies when you trade stocks. You can sell your shares at a profit if they
increase in value. The ideal investments can last a lifetime.
QUESTIONS (INTERPELLATION)
1. Does the gambling industry contribute to the finance industry in terms of tax? If yes then, with
the online gambling industry contributing to the economy through tax does that not mean that it
supports the notion of online/ cryptocurrency as the future of finance?
2. If people who are gambling are called gamblers then, why are people doing cryptocurrency
called investors?
3. If cryptocurrency transactions are pseudo anonymous and can protect the real identity of it's
account holder then why risk your real world identity on gambling when you can choose crypto
which is an investment and stay anonymous?
4. Why can you say that cryptocurrency is a speculative tool for gambling when it is an
investment? Does investing and gambling now have the same definition?
5. Is investing in cryptocurrencies the same as gambling?