As of January 2022, the market capitalization of crypto is $895,688,387,523. Whenever some new digital financial service launches, every day more and more people jump in as it gets more popular. As of 2021, there are an estimated 300 million crypto users worldwide. There’s been a lot of hype around this new financial system as it has given rise to several successful tech companies such as Coinbase, Circle, and Blockchain abilities, just to name a few.
What is so interesting about the new digital financial system is that it’s not just for consumers. Businesses can also take advantage of new digital services to help increase their profitability. However, still relatively new, the digital financial system of digital coins is considered small in comparison to older investment opportunities.
How Blockchain Technology Could Change the World of Business?
Blockchain is the underlying technology behind cryptocurrencies like Bitcoin. It’s made up of blocks secured by cryptography and distributed across a network, which means there are thousands or even millions of copies stored in locations around the world. This creates a decentralised system that’s almost impossible to change or hack because changes have to be agreed upon by every single user on the network at once. This is just one of many benefits blockchain has for businesses, but it’s not without its risks. The decentralised nature of blockchain means it’s vulnerable to large scale attacks. It’s also held back by slow transaction times. Blockchain technology has made it easier for businesses to invest and use cryptocurrencies, which has helped bitcoin, Ethereum and other cryptocurrencies to get mainstream attention. The problem is, cryptocurrency transactions are often expensive, slow and inefficient.
This technology also has the potential to cut out middlemen such as banks and escrow agents, allowing for direct transactions between investors in an ICO or promises of future payouts. There’s even the possibility of smart contracts for legal agreements between parties that involve a blockchain. It’s a multi-billion dollar industry that’s growing all the time. So why are many businesses and consumers interested in using this new financial system?
The Common Misconceptions About Cryptocurrencies!
First, let’s look at the common misconceptions about cryptocurrencies. Many people think that when it comes to cryptocurrency trading there is no middleman involved. That is obviously not true.
For example, Coinbase is one of the biggest cryptocurrency platforms in America, and they charge a fee of 3.99% to process transactions. This fee may seem low but if you’re a merchant with millions of customers then it adds up really quickly. However, for small businesses, this fee is definitely worth it because there’s no limit on how many transactions you can process through their platform.
Also, you may think that this new financial system is anonymous. Again, that is not true because every transaction is tracked and recorded on the blockchain. In order for businesses to use digital currencies for cold wallet transactions, they need to accept the fact that every transaction will be visible in the public domain as it gets recorded and verified in the blockchain ledger. This is a huge advantage for businesses because it allows companies to track their customers’ spending habits.
The Future of Business/Finance Relationships!
There’s a lot of buzz around this new financial system because it lowers business transaction fees, gives consumers greater flexibility to pay with the currency of their choice, and reduces fraud.
Many people believe that digital currencies will replace fiat currency. But just because the market has been growing exponentially doesn’t mean that fiat currency will disappear by 2030. When you think about digital currencies there are three core components:
First, there is the chain, which is a ledger of transactions stored in data blocks. Second, there is proof of everything that gets written into this chain. Third, there is trust in this ledger as every transaction gets verified independently by hundreds of distributed computers called miners.
That last component is what makes digital currencies reliable and trustworthy. The miners are incentivized to do their work because they get rewarded with coins for verifying transactions on the blockchain.
The real value of cryptocurrencies will be seen when more businesses start using them for their transactions. For example, in China, there has been a huge increase in businesses that have started offering digital currency payment options for their customers.
However, if more companies start using digital currencies as payment options then it will create more demand which will increase the value of these digital assets. This has led to the market cap for cryptocurrencies growing from what it is today going well into its billions.