How Crypto Is Redefining the Future of Finance

Ever since the creation of Bitcoin in 2009, many virtual currencies have soon hit the market, and the use and ownership of cryptocurrency have been increasing over the last few years. However, there is still mystery surrounding crypto. A lot of people still question what it can be used for, how it is going to affect the future of financial markets, and what it is exactly.

In its simplest form, cryptocurrency is a digital version of currency that utilizes blockchain technology and a unique combination of codes generated by cryptographic functions to move transactions. Bitcoin, Ethereum, Ripple, and Litecoin are some of the most popular and widely used cryptocurrencies in the market today.

Research shows that Bitcoin transactions and accounts alone have reached a growth rate of about 60% annually over the last five years. This implies that cryptocurrencies are somehow being embraced quickly and openly.

If you’re still wondering how cryptocurrencies work and how widespread it has become ever since its inception, you’ve come to the right place. Let’s have a look at how this rising currency came to be, how it works, its applications, and its stand in the future.

The Evolution of Cryptocurrency

The most significant event that led to shaping the crypto industry is the launch of Bitcoin (BTC) on a decentralized network. The peer-to-peer electronic cash network operates using blockchain technology, which is run by people who use it. This means that there is no distributor or intermediary to check the transactions in the blockchain, and there is little to no room for stealing.

In its core, cryptocurrency exists and works thanks to the advances in the field of cryptography back in the 1980s. This innovation paved the way for developing the blockchain technology that forms encryption systems designed to protect the network.

Not long after the launch of Bitcoin, Litecoin (2011), Ripple (2012), and Ethereum (2015) followed suit. Today, there are thousands of digital currencies in circulation, with BTC being the oldest in the market. There are also digital currencies that not only use and distribute coins but also allows users to add an extra layer of protection on the blockchain. This agreement code is called a “smart contract.”

Statistics show that the cumulative market capitalization value of cryptocurrencies reached $237.1 billion. This demonstrates how fast the industry is growing. It also provides investors an idea of the cryptos’ market size and how much money is moving in the market.

Much like stocks, the prices of cryptocurrencies experience large price swings. This volatility and erratic pricing behavior are what attracts investors to buy cryptos when the price is low and sell them when it reaches its peak to earn large profits.

Adoption and Use of Cryptocurrency

Cryptocurrencies use decentralized technology to store money and perform secure transactions, and they can do it without the need to go to a bank or to have to use their name. The transactions are entirely private and occur on a public ledger (blockchain), which records all the transactions made by currency users and owners. Its decentralized nature is its notable feature.

In Japan, one of the world’s most forward-thinking nations, its largest bank is jumping on the cryptocurrency trend. Mitsubishi UFJ Financial Group Inc. is working on issuing its own virtual currency. By controlling where people can trade their MUFG currency, they can oversee and suppress any extreme fluctuations in its price. The coin can be used for shopping, remittances, and other transactions.

In the same vein, the Chinese government has kick-started its pilot program for the official virtual version of their fiat currency, which can be used for transactions through a digital wallet without opening a bank account. China’s step towards adopting cryptocurrency might have the potential to stand against BTC and the U.S. Dollar.

On the other hand, IBM and CLS are coming together in partnership to set blockchain app stores for banks in motion. This partnership launched LedgerConnect, a distributed ledger technology platform designed for companies in the financial services industry to simplify crypto transactions.

Meanwhile, Thailand’s most prominent movie theater chain is integrating crypto payments in its payment system. This allows customers to use cryptocurrencies to buy tickets, popcorn, and other services. Even when a global health crisis puts the world on a tailspin, interest in cryptocurrency persists and increases.

In Nigeria, the expensive fees for cross-border money transfers have pushed many to try out cryptocurrency exchanges accommodating Nigerians who live and work abroad. Cryptos serve as an economical option for the transitional system, as they can just use their smartphones to send money and pay for purchases in stores.

Below are some of the top reasons companies and institutions should consider adopting cryptocurrencies and blockchain technology.

• Programmable money. Smart contracts can be used to eliminate the manual and repetitive work when it comes to doing transaction agreements.
• Privacy and security. The decentralized nature of cryptocurrencies allows people to keep their transactions private and anonymous while providing traceable records.
• Accessibility. One of the major opportunities cryptocurrencies can provide to people is making the financial model available to billions of unbanked individuals around the world.

Summing It Up

The cryptocurrency industry, as well as blockchain technology, is still in its early stage. As more people dive into cryptos and more technological advances emerge, more functionalities and practical applications should be expected from this innovation. Slowly, cryptocurrencies’ sophisticated systems will demonstrate its effects in the financial industry.

Virtual currencies are disrupting the financial industry. It may strike confusion and capture the attention of many, but one thing is for sure: it is here, it will continue to rise, and it will transform how people transact in the next several years.

It will soon change the finance industry for the better—bringing accessibility to more people and unlocking numerous investment opportunities for people and businesses.

About the author:

Ed Drake is an author at CoinGeek, a technology enthusiast, and an avid fan of online gaming. When he’s not writing about blockchain and Bitcoin, he plays video games, be it on the PC he built piece by piece or one of his many gaming consoles.