Merits of Cryptocurrencies
What good does crypto bring, what are the real-world use cases, positive impacts, its future potential and why you should consider using cryptocurrencies.
In contrast to my previous article about the times when crypto “died”, today I am going to focus on the positives — instances of beneficial impacts, useful implementations or other, generally speaking, wins of cryptocurrencies. I don’t want to ignore any problems or potential risks, but my aim in this article is to demonstrate the good that crypto can offer to the world. We so often hear about price crashes, rug pulls, cryptocurrency scams and other negative news that sometimes the positives simply go unnoticed.
Wide applicability of blockchain
The nature of blockchain technology (inherently tied to cryptocurrencies) in itself is first and foremost informational. Therefore, although it is mostly known due to Bitcoin and other cryptocurrencies, blockchain can be applied to many different fields and have varied use cases.
Most use cases have to do (not-surprisingly) with the unique features of blockchain technology: the complete transparency of the public ledger while maintaining the anonymity of its users alone is almost a technological marvel. Realistically unbreakable security together with immutability of record makes blockchain also very attractive. Moreover, the technology elegantly solved the Byzantine consensus fault (failure of one node meaning failure of the whole system) while staying independent on any central authority and indiscriminate in who uses it — anyone with the access to the internet can become a user.
Nowadays, blockchain has already found a use in logistics (e.g. for tracking a quickly perishable goods, such as food, monitoring its freshness and effectively tracing down origins of any error within the logistics chain in no time), healthcare (by e.g. storing encrypted patient information that is shared across healthcare providers, removing the need for form filling), voting systems (adding a level of security unmatched in current systems), other aspects of public sector (e.g. transparent and in-real-time budgeting and budget tracking), human resources (e.g. recruiting or storing staff’s private information) and more.
Obviously, the most popular application of blockchain technology is in the financial sector. Decentralized finance services are on a boom, cross-border transactions have never been easier and with the use of quality crypto products, your assets have never been more secured. Speaking of security…
Some people may suggest that cryptocurrencies are not safe at all — you hear all the time about scams, stolen coins and terrible investments.
However, and this is very important in my opinion, this does not speak about cryptocurrencies per se!
Because of blockchain technology (meaning the true and decentralized blockchain, e.g., Bitcoin) and the cryptographic functions built into it, arguably no monetary system is more secured against theft of any kind, fraud, double-spending or hacker attacks. The system itself is probably the best we have seen so far when it comes to digital security.
What fails (and then creates the headlines you have probably read) are humans: someone leaked their secret key (password) by mistake, there was an error in the code of security protocols of an exchange that was exploited by hackers, or someone made a bad investment decision and then complained that he/she lost all the money. I don’t want to in any way downplay these problems, they should still be addressed and shouldn’t happen, but in my opinion, it is very important to distinguish between failures of the system itself and those of human decisions. Hopefully, the latter can be minimized through education and worldwide adoption of the technology.
What cryptocurrencies offer is a trade-off: You have the opportunity to be the sole person in control of your money— no middle-man, no central authority — but that also comes with the complete responsibility over your finances. If you lose your key or send the coins to a wrong address, that’s on you. Full control with full responsibility. And it is actually the first time in history when system like this functions, and is being adopted worldwide, which is incredibly exciting and brings many more opportunities.
Of course, you can decide that the trade-off is simply not worth it for you, no shame in that. You can still be a user of cryptocurrencies through third-party applications for example (which will partially cover the risk and take on the responsibility) while simultaneously benefit from at least some of the aspects of this new technology.
Independence on central authority
This point follows up on the previous one — with using cryptocurrency (mind you, on a truly decentralized blockchain), you get the complete independence from any central authority, third party or financial middle-man. Of course, keep in mind the aforementioned trade-off.
I think too little people realize how big of a deal this is. Again, in no time in history did central authorities (companies, central banks, governments, monarchs, dictators…) have no control over the money supply and currency until crypto. Why is this such a good thing?
One great example is also a fairly recent one: After Ukraine was invaded by Russia two weeks ago, Ukrainian credit-cards stopped working for most of the population and their assets have become inaccessible to them. However, because nobody controls Bitcoin, it cannot simply be shut down and so, for many people, it became the only viable option for making payments, purchases or transactions.
Independence on central authority also means, that there is no central “hub” that can be attacked with the intention to damage or destroy the system, which makes the technology very robust and, again, secure.
In a way, the decentralization of the technology can be also viewed as a tool for achieving freedom. This can be especially important in countries like North Korea, which is under totalitarian regime, because, as often debated, if you can’t control the money, you can’t control the population. Or at least you’ll have a pretty hard time. This can also be one of the reasons why countries like China or Russia are strongly against cryptocurrencies and try and regulate them as much as possible.
If you are interested in the topic of cryptocurrencies as tools promoting freedom and human rights, I highly recommend this phenomenal episode of Lex Fridman Podcast with Alex Gladstein:
A topic which is also often discussed — especially nowadays — is inflation. The fundamental question is whether the governance of economy through inflation is a good or bad thing. And there exist strong arguments why it is not only bad, but straight up theft (I’m not arguing pro or against this point, I’m simply putting it on the table). Now, Bitcoin and many other cryptocurrencies offer a non-inflationary alternative to a classic fiat currency and some cryptocurrencies are even deflationary by design. This gives every person with access to the Internet an option to break away from the effects of inflation, if he/she seems it fit.
Moreover, DeFi (decentralized finance) gives alternative to classical financial services, which not only provides this option to many people for whom it was previously unavailable, but also (usually) offers much better terms. Even the conservative crypto investments (e.g., staking stablecoins) offers on average double or triple APY in comparison to an ordinary savings account. DeFi has become one of the few strong competitors in the financial sector, which further undermines the overall monetary control held by central and commercial banks (which, if nothing else, can put pressure on them to improve their terms of services).
Last but not least, smart contracts expand the potential use cases of crypto even further.
To simply explain: one can think about smart contract as a programmable application/protocol functioning on a blockchain, which is designed to execute intended (programmed) functions automatically.
Smart contracts are greatly valuable in the process of automation, especially when it comes to filling forms, legislative or internal documentation and paperwork in general. They have a potential to for example reduce the pressure put on small and medium businesses by endless amounts of invoices, inventory reports, payrolls and other transactions. Smart contracts can be used to automatically and without manual input create, validate, approve or send all the necessary documentation, all completely securely.
And again, all the already mentioned industries — healthcare, logistics and supply chains, public sector, financial services and also real estate, legal industry and more — can potentially benefit from using smart contracts. In many instances, smart contracts can provide faster, cheaper and more secure solution than any centralized product can (that’s not to say they should be used everywhere and for everything, but the potential is huge).