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How Cryptocurrency Has Changed The Outlook Of The Economy For The Better?

22 November 2022 13:30, UTC

Cryptocurrencies have evolved from being a novelty on the internet to trillion-dollar enterprises that have the power to upend the world's financial system. Digital currencies are used to pay for anything from programs to property investment, as well as being increasingly regarded as assets.

Around the world, rules varied greatly, with some governments encouraging cryptocurrencies and others banning or regulating their use.

Central banks integration with recent crypto boom

Central banks work on a controlled and backed system, or to put it simply, a centralized systematic approach. However, blockchain technology works on a distributed ledger technology which is also known as a decentralized system.

But don't be mistaken if you assume the central banks around the world will not integrate blockchain technology for their own good. The central banks have introduced a CBDC. It's their own digital currency controlled by central banks. 

This digital currency will be encrypted through a cryptographic signature that will only allow an authenticated user to access the digital currency. 

How does it affect the economy?    

The trade of cryptocurrency doesn't need a middleman. The speed of processes rises as a result. Transaction expenses are reduced because there are no middlemen. Reduced transaction costs imply improved exchange efficiency and a rise in transaction volume. 

There is less necessity for a geographic space where people may gather and do business. Due to the absence of a salary, rent, or utility fees, fixed costs are reduced. 

Furthermore, cryptocurrencies are not restricted by territorial boundaries. As a result, there isn't any central organization to oversee the transactions. For businesses, this makes commerce simple and rapid.

As a common currency between nations, virtual currencies can facilitate greater commerce. Trading can benefit many individuals to gather immediate funds for a longer investment plan. Most traders want bit profit rapidly so they can further expand their asset allocation in the digital world.

Does blockchain technology promise a secure financial future?

Every advantage to humanity has a price for the environment. Blocks of data are used to protect the data in a digital manner. The information is tabulated to make information filtering simple. There are a number of claims regarding substantial energy usage and increasing carbon emissions due to the preliminary phase of distributed ledger technology.

Looking at the current financial communication network consumes more energy than the bitcoin community does. The expansion of ATMs, the functioning of local banks, the upkeep and modernization of data centres for banking transactions, as well as the whole international banking system, are all responsible for the traditional finance system's substantial power usage.

Challenges for the economy

Multiple challenges have surfaced due to emerging technology. It has created havoc in the cyber security departments. The economy may be in danger due to ultra-technical hackers online. The anonymity will cease them, from being caught or revealed. 

In terms of the finance world, it could majorly affect the economy through the lessening of central banks' activity if people choose to completely make all payments in crypto.

Final words

The economy is majorly affected by this technology. It has both negative and positive impacts.

If used in the right manner, it can create wonderful opportunities for us but we need to be cautious of the cyber attacks that we are exposed to at all times.