Why Do Cryptocurrencies Exist At All?
By The Cryptocurrency Consultant on ALTCOIN MAGAZINE
Bitcoin and altcoin courses rise and fall, but why should you even deal with cryptocurrencies?
Hopefully, the examples will also make you think. You will always ask yourself why some things are the way they are and whether they could not be better implemented. (I get commissions for purchases made through links in this post.)
To anticipate the answer: Yes, much goes better and doesn’t have to be the way it is today. Cryptocurrencies are the alternative for many well-tried concepts, but they are still being further developed.
The more I look at the technology and the different applications, the less doubt I have about the future of cryptocurrencies.
I try the “Inception” first on small scale with you.
Number 1: Transfers take several days
My first example is PayPal, one of the best-known online payment service providers. You’ve probably already used this service yourself to pay for a pizza or eBay order online. There are a few advantages that should convince you to use this service.
So your bank transfer is secure. You can use PayPal buyer protection to get your money back if something doesn’t fit on your item or it isn’t delivered at all. Another advantage is that the money arrives directly at the seller when you click on “Buy”. Practically for everyone who runs an online business. I also use PayPal.
However, there are also downsides that you only become aware of when you get to know PayPal from a different perspective AND you know the alternative of cryptocurrencies.
- PayPal is a platform and takes fees per transaction from the (commercial) recipient.
- Transfers from PayPal balance to bank account take at least 1 business day
- Your money can be blocked
- Buyer protection is a service and not an immediate chargeback.
Good alternatives in the form of cryptocurrencies are PIVX and Nano
In the case of crypto transactions, control lies entirely with the sender and receiver. They are peer-to-peer, so there is no PayPal in between that deducts fees for the transaction from one party. Nano is complete with no transaction fees, PIVX can be sent with no fees and with a mini fee for even faster transactions.
Cryptocurrencies are encrypted using cryptography and are therefore completely secure. There is no way to forge transactions, manipulate account balances, or bypass encryption (hacking).
Buyer protection is a nice idea: the money is withheld in the event of a complaint. The buyer still has to agree with the seller how to proceed. PayPal neither takes care of the communication nor of the arbitration of the conflict.
Nano has interfaces (APIs) that send the amount back in case of failed transfers. If too much is transferred, the superfluous XRBs are returned immediately. PayPal doesn’t really transfer the money immediately but in advance. That is, they confirm the transaction, but transfer the amount from their own account.
If you want to continue to use your credit outside PayPal, the transfer to a bank account takes at least one working day, in extreme cases even 7 days. I experienced this myself when I sent the company’s turnover over Christmas to the bank account to pay for the regular expenses.
Where is the money at that time? Is it really still there? Why doesn’t it scare you when your money floats virtually in the air? Because you don’t know it any other way. The normal bank transfer can go wrong at more than one point. At each arrow of the graphic, your money (in theory) can get lost.
You’re completely screwed if PayPal doesn’t like you anymore. In the user conditions are many contract components, which are especially annoying for commercial users. Of course, hardly anyone reads the terms until certain aspects suddenly make all transactions impossible.
At the beginning of my commercial PayPal experience, I learned that there can only be 2,000€ on the account. Without further verification, the account was completely blocked for deposits and withdrawals.
Of course, I submitted all the documents later and was able to solve the problem again. But what if I needed the money urgently? The problem took several days to solve and it didn’t go smoothly.
With cryptocurrencies, such a case cannot occur in the first place. Create a private wallet, secure it and that’s it.
Conclusion: This is not supposed to be a smear campaign against PayPal. On the contrary, I am glad that there are payment service providers that I can easily integrate and use. I also don’t want to speak ill of the advantages, because PayPal offers even more, such as accounting. But you see that every service can have its downsides and there are already better solutions in cryptocurrencies. That’s why I have integrated the nano payment on my website.
Number 2: Account management costs fees
Current accounts without costs are a sales argument that almost every direct bank has to offer nowadays. But why are there any fees at all for someone managing your money for you?
The banks argue with service. These are things that mainly happen offline:
- Depositing and withdrawing banknotes (or coin-operated machines)
statements of account
- “Added value” in the form of Dispogrenzen
- Personal consultation in the branch office
Honestly, these are things that will disappear completely soon anyway.
Of course, employees of the bank have to be paid. But I myself only use online banking. I haven’t visited a counter with employees for ages. When was the last time I visited you?
I always receive my account statements by post and don’t need them. They disappear immediately into the closet or paper shredder and that probably because I’m too lazy to check “online statements”.
I almost never deposit money in cash. When I was 10, I last made coin rolls with enthusiasm. There are certainly still people who use these services. But this group is getting smaller and smaller. Other countries are leading the way.
In the USA you pay with a credit card at the baker. In Germany (still) unthinkable. In general, you hardly need any cash in the USA.
The same is true of neighbors in the Netherlands, where cash is increasingly denied. A bouquet of flowers on the market, a ticket on the train, parking in the city centre — everything is possible with Maestro, a credit card or app. In China, you can pay cashless with your mobile phone in many supermarkets.
In a few years, cash will have disappeared, as well as far-reaching demand for services. The bank will then only manage virtual numbers. A bank’s profits are generated elsewhere when the fees for accounts are no longer a main source of income. How do I know?
I didn’t work at any bank, but I can add up one and one. A few days ago I received an interesting flyer from the local savings bank. I don’t usually read it. But the subheading made me curious.
“If you get a discount on the base price of your account for using products at your savings bank.”
This is where a few marketing tricks come together.
- Discount principle — you can save and that in a playful system *fun fun fun*.
- Premium Status — you become a Platinum Member at a certain number of points. Status!
- Added value promise — you have with the other products in any case an advantage
What’s the savings bank doing here? It tells you that you have to pay the contribution to your account anyway, but you can reduce it by more service.
The real goal is to sell financial products that bring much more commission.
In case you didn’t know: Your bank does not put your money in a safe and locks it. It uses it to make profits on the stock market. It lends it to get interest. In short: the banks work with your money. If the bank goes bankrupt, nobody knows if you still have your money.
Now the solution: The basic idea of Bitcoin is to make banks superfluous. There is no one but you who manages your money. A wallet is free. You won’t be offered any other products you may not need. A transaction is only executed by you.
Conclusion: Banks try to justify the fees for accounts in order to sell you more products. Most of the time you don’t even notice that. There are direct banks that offer you only one account. But even there you have to reckon with advertising. Your feeling of security is deceptive. You trust the bank. Trust has probably not been disappointed so far. But you don’t have control. When you create a Bitcoin Wallet, you don’t have to accept these disadvantages.
The banks are in a very bad light in this example. But they will move into the right light again. If banks don’t develop further, people will rightly start using the alternatives.
Number 3: No control! about your pension plan
When investing, you probably think long-term and your pension also plays a role. The general news, however, is full of inflation reports and ever decreasing pension notices.
You’ll be scared to death. Do I have to live in poverty in my old age? Do I get anything from the state at all when I’ve worked through 50 years or more? All these are frequently asked questions in connection with the topic.
Then a shining knight on a white horse comes along in the form of a financial and insurance consultant and enlightens you properly. The industry sells you securities for money. A savings plan, in one form or another, can be found in every suitcase.
You may have heard the following arguments during a consultation:
- Inflation leads to the devaluation of FIAT money
- You have to save for old age
- 3 possible ways: pension fund (state), occupational pension (subsidies from your employer) and private pension (financial products)
- The private provision offers the best chances of being well positioned in the long term
I don’t want to dive further into the financial system at this point. It is only important to me that you understand that consultants and banks tell you the same thing.
The argumentation is not wrong either.
Since money can simply be printed and infinitely multiplied, it becomes less and less worthwhile. The consultants are right on that point. I also agree that you shouldn’t put your money under your pillow. You have to invest it in things that are stable in value or even grow. These are called real assets and include stocks, commodities and other investments.
A simple investment is a fund. There, various tangible assets are bundled and you can invest part of your salary each month.
I got a little excited about the classic banks and insurance companies. The goal of cryptocurrencies is not to destroy these companies, but to force the world to better solutions.
There are also intelligent people in banking and finance who are interested in more than just your money. I have the hope that the financial sector will soon work more with the advantages of cryptocurrencies. At some point, the market will be so big that it can no longer be ignored.
In the discussion over jobs and improvement of the quality of life by cryptocurrencies, I could go now fully into it. But it is better to shift back a gear. I only brought the examples to shake you up a bit.
My expectation is not that you will change your complete world view through the three examples. But maybe you can see which alternatives and improvements cryptocurrencies already offer you today.