Cryptocurrencies have been around for a while, changing the perception of money, investments and savings. Blockchain networks boost cryptocurrencies into the mainstream, which is what happened to Bitcoin, the first digital coin released into the market since they’re decentralized financial systems. After Bitcoin became famous and an increasing number of users became interested in crypto finance, more cryptocurrencies were created, reaching the number of 22,932 in 2023. With so many options, you’d think investors have it easy, but the truth is that this digital sector is only beginning to settle, which is why volatility levels are concerning.
Although it’s a revolutionary technological advancement, cryptocurrency has to work on many aspects to make the investing process accessible again. Given that network congestion is common in most blockchains, mining fees and requirements change, making it more expensive and complex for miners and investors to create a sustainable income. Plus, the high amount of energy necessary to sustain these processes is affecting the environment.
Regardless, there are many reasons why cryptocurrencies represent the future of finance.
Cryptocurrencies boost e-commerce revenue
Cryptocurrencies play an important role in transactions because they help minimize duration and decrease fees. With the help of blockchain technology, transactions become faster, easier and safer, leading businesses towards more efficiency. Compared to credit or debit card users who usually have to wait a day or more for their transactions to be carried out, with cryptocurrency, a transaction is completed within seconds. Financial institutions do not record transactions, and there are no requirements to fill in personal information, strengthening people’s financial data and identities.
Cryptocurrencies also help e-commerce evolve by ensuring the following:
- Low transaction fees, considering that no official institution carries out the operations;
- Increased decentralization thanks to the lack of third parties controlling the transactional processes;
- Reduced fraud risks due to improved security created with the help of encrypting technologies;
- Increased traceability of the supply chain by eliminating human errors and real-time monitoring;
- Cross-border payments, so companies will be able to accept worldwide payments;
Many centralized companies, such as PayPal, collaborated with blockchain solutions to extend their range of opportunities for customers to explore in regard to cryptocurrency payments. eBay also considers accepting crypto as an alternative payment option.
Cryptocurrencies provide various value models
Bitcoin started as a store of value, which has proven to be efficient, but as the domain expanded, developers found cryptocurrencies to be useful in other ways. Considering there are many types of digital coins serving different purposes, here’s how cryptocurrencies expand e-commerce possibilities:
- Utility tokens provide access to platforms their activity is based on;
- Security tokens are issued and used by financial regulation institutions;
- Payment tokens are used outside their platforms for purchasing goods and services;
- Exchange tokens are created mainly to be used within exchange platforms;
- Non-fungible tokens have unique identities and limited issuance;
However, one of the most revolutionary digital coins that enhance finance is the DeFi token (decentralized finance) used on dApps or financial applications built on blockchain. Most of them are based on Ethereum, but other ecosystems like Stellar, Polygon and Cardano also support their development.
Cryptocurrencies give more power to the people
Although traditional financial institutions are reliable, that doesn’t mean they don’t have issues that challenge customers and the financial sector at all. The industry has yet to keep up with technological advancements, which hinder transactions, transparency and efficiency. At the same time, governments control people’s banking accounts and limit their possibilities.
With cryptocurrencies, these aspects would be reduced, as blockchain gives more freedom to users. Being a relatively new sector, it lacks regulation and safety among real-life use cases. Still, developers, creators and even governments are working towards a more straightforward way for people to use their investments to purchase real products and services. Now, people can keep their investments in a digital wallet safe enough to monitor their assets. Users can do anything with those finances, from withdrawing them to putting them to work. This facilitates finances and makes it easier for people to use their funds.
Cryptocurrencies can make companies more productive
Blockchain technology can be used by companies to make tedious processes more efficient, while cryptocurrencies contribute to rapid transactions and increased safety; considering these two aspects, any business would want to accept cryptocurrencies as soon as possible. Organizations also have the choice of how they will adopt cryptocurrencies:
- The hands-off methods, where businesses enable crypto payments and convert in and out of crypto to fiat money;
- The hands-on strategy, where the integration of crypto reaches all systems and the use of third-party vendors, provides wallet management services;
Using cryptocurrencies also paves the way to finding a new targeted group of customers interested in digital services and payments. Such an opportunity usually enables access to new capital and liquidity pools but also widens payment options that are not available with fiat currency.
Cryptocurrencies reduce the chances of fraud
Fraud and corruption in the financial sector have been present for ages, and not even the latest strategies to stop them aren’t enough; however, by using more cryptocurrencies and blockchain solutions, companies could manage fraudulent behaviors more efficiently. Compared to traditional finance, blockchains have increased traceability options and the chances of fraud decrease because everything can be found on public networks.
Decentralized ecosystems enable peer-to-peer transactions, meaning hackers are more challenged to manipulate the system. As transactions are recorded on the distributed ledger of each blockchain, each participant on the network has a copy of the same ledger, so it’s easy to detect and stop almost any data modification. Blockchains have the power to mitigate fraud and are already used in sectors like supply chain management, healthcare and education.
Bottom line
Cryptocurrencies are relatively new assets on the market but have changed how people perceive finances. At the same time, by enabling cryptocurrencies, companies can leverage more benefits of reaching certain audiences and strengthening their security. More importantly, the use of cryptocurrencies can mitigate fraud and illicit actions through encryption and decentralization.
