Cryptocurrencies are currencies that in digital form and are usually secured using cryptography (cryptography). The most famous of these is Bitcoin. Therefore, I will first describe Bitcoin and then give informationabout the advantages of cryptocurrencies have brought to the traditional financial system.
Bitcoin is a digital asset created in 2009 by a person or group using the pseudonym 'Satoshi Nakamoto' and is considered the world's first cryptocurrency, and intended as an alternative to traditional currencies (e.g. dollar, euro). It enables decentralized, distributed, and often anonymous transactions.
It works on a distributed ledger technology called the blockchain. The blockchain is a record that contains all the transactions made, copies of which are stored on many different computers and are constantly updated. This technology ensures the security and transparency of transactions, at the same time there is no need for a central authority or brokerage firm.
For its creation, it is necessary to carry out mining through a computer. In the process, computers solve complex mathematical problems and receive new Bitcoins in exchange for those solutions. However, it becomes more difficult to create new Bitcoins every day because the system is designed to stop producing new Bitcoins after a certain number of Bitcoins (21 million Bitcoins) have been produced.
This asset, whose supply is limited just like Gold, is accepted by many people and organizations and it is used in more places. However, as the popularity of cryptocurrencies has grown, governments and regulators have also begun to focus on how cryptocurrencies will be regulated and taxed
What are The Advantages of Cryptocurrencies to The Financial System?
Faster and Cheaper Transactions: No need for banks or other financial intermediaries to use cryptocurrencies and have lower transaction costs compared to traditional financial systems. In addition, transactions take place more quickly compared to traditional banking systems. This is a significant advantage, especially with international money transfers, because cryptocurrency transactions are usually completed within minutes, while international bank transfers can take days.
Access to Financial Services: Many individuals and businesses around the world do not have access to traditional banking services. Individuals and businesses that do not have access to a bank with cryptocurrencies provide access to financial services.
Greater Transparency and Security: Blockchain technology keeps an immutable record of transactions. This helps prevent fraud and all transactions are transparent.
Innovative Financial Products and Services: Cryptocurrencies and blockchain technology enable the development of innovative financial products and services. For example, smart contracts facilitate and secure financial transactions by providing digital agreements that are automatically executed and verified.
More Financial Privacy: Cryptocurrencies offer more financial privacy by protecting users' identities. This is a significant advantage for users who do not want their transactions to be tracked or monitored.
Storing value: Cryptocurrencies can be used as a store of value in times of economic and political uncertainty. In particular, some cryptocurrencies, such as Bitcoin, tend to act independently of other asset classes, allowing the investor to diversify their portfolio.
Although the future of cryptocurrencies is uncertain for the time being. Developments in this area and increasing adoption show the way that cryptocurrencies will continue to play an important role in the world of finance and technology.
