Many argue that the invention of blockchain technology is comparable to the revolution brought about by the invention of the Internet in the 1980s. Bitcoin (BTC), which started out as a niche for technology enthusiasts, has in just 13 years become a serious player in the financial arena, and its market capitalization is approaching that of Google, one of the world’s largest technology giants. Kimberly Rosales, an expert in cryptocurrencies and the founder of ChainMyne, explains the role that cryptocurrencies will play in the finances of the future.
One of the reasons behind the growing popularity of cryptocurrencies and people’s increasing interest in them is that the technology that forms the backbone of cryptocurrencies promises greater financial inclusion compared to traditional finance. It is very important for developing countries and emerging markets that have increasing economic potential, which are the regions with the most potential for significant adoption of cryptocurrencies.
While Blockchain technology cannot solve all of society’s problems, it is the community behind this industry that must address the factors that cause financial exclusion. Among the basic characteristics of cryptocurrencies is that they are virtual currencies that were born as a means of digital exchange.
Digital currencies do not exist physically but are an electronic record covered by blockchain technology. Those who use them only have the support provided by the trust of the people who are part of that electronic registry.
“These digital currencies have an impact on the world economy, so, I feel it has been necessary to explore the relationship between both concepts by providing examples in which cryptocurrencies have represented an alternative for the economy,” Rosales states. “Likewise, its biggest disadvantage, its volatility, is analyzed in order to have a broader picture of what cryptocurrencies represent.”
In recent years they have been in high demand, but it is expected that in the future, they will be more widely accepted, and therefore volatility will decrease. This would increase the traded volume of BTC, decreasing the cost of commissions, approaching a more efficient system.
Cryptocurrencies are an efficient and highly secure way of managing operations since they are based on the principles of cryptography which, by means of a blockchain, allows keeping a perpetual record of the transactions carried out.
This blockchain is a public registry where all the operations of these digital currencies are kept. However, even though this ledger allows any user to trace all transactions made by all computers on the network, the information of the people involved is still protected.
The security of digital currencies is not only due to the encryption, but also to the verification. The network of users managing the blockchain validates the transactions. Cryptocurrencies can be viewed as an alternative to the existing monetary system because the technology behind them and multiple advantages have been considered as a determining factor to transform the way in which transactions are conducted.
“One of the main advantages of cryptocurrencies for the financial future is that they do not require an administrator; that is, they do not depend on governments, banks, or any institution to function,” says Rosales.
This is vital because it allows for independence from economic crises and recessions. It also gives you the highest possible market price. Dependence on governments and banks is expensive for society because of two main reasons. First, cryptocurrencies lower commissions and eliminate interest on operations performed. Second, the government can’t distort accounts by printing more money. This could lead to inflation.
This digital currency is a great option for the future in finance because it allows people to “save capital” and keep their money intact. They also offer flexibility operations that are very liquid, which can be a huge advantage. Rosales says that digital currencies are rapidly gaining popularity and could shake the foundations the global economy.
As an example, some UK citizens bet on virtual currencies in order to preserve their capital’s value as a way of reducing the economic effects of Brexit. Citizens of China experienced the same thing in mid-2017, when their market was affected and the value the yuan had drastically decreased.