Cryptocurrency has grown in popularity in recent years, but many consumers and investors may be wondering what all the fuss is about. Why would somebody pick Bitcoin when their native currency suffices for the majority of purposes? What are the benefits of using cryptocurrency?
Indeed, there are several benefits to utilizing and investing in Bitcoin. Here are the top eight advantages to think about.
8 benefits of using cryptocurrency
- Transaction speed
- Transaction costs
- Accessibility
- Security
- Privacy
- Transparency
- Diversification
- Inflation protection
1. Transaction speed
If you want to send money to someone in the United States, there are a few faster ways to transfer money or assets from one account to another than using cryptocurrencies. The majority of transactions at US financial institutions are settled in three to five days. A wire transfer typically takes at least 24 hours to complete. Stock transactions are settled in three days.
However, one of the benefits of cryptocurrency transactions is that they may be done in minutes. When the network confirms the block containing your transaction, it is fully settled and the money is accessible for use.
2. Transaction costs
When compared to conventional financial services, the cost of dealing with crypto is quite cheap. A domestic wire transfer, for example, is not unusual to cost $25 or $30. International money transfers might be much more costly.
Transactions using cryptocurrencies are often less costly. However, you should be aware that increased demand on the blockchain may result in higher transaction prices. Even on the busiest blockchains, median transaction fees remain lower than wire transfer prices.
3. Accessibility
Cryptocurrency may be used by anybody. All you need is a computer or smartphone with internet access. When compared to opening an account at a typical financial institution, the process of creating a crypto wallet is incredibly quick. There is no identification verification. There is no credit or background check.
Cryptocurrency allows the unbanked to get access to financial services without going via a centralized authority. A person may be unable or reluctant to open a standard bank account for a variety of reasons. People who do not utilize traditional banking services may be able to use cryptocurrencies to conveniently perform online transactions or transfer money to loved ones.
4. Security
No one can sign transactions or access your funds unless they have access to your crypto wallet’s private key. However, if you lose your private key, you will be unable to reclaim your cash.
Furthermore, the blockchain system’s nature and the dispersed network of computers confirming transactions safeguard transactions. The network grows more secure as processing power is added to it.
Any network attack or effort to change the blockchain would need sufficient computer power to validate numerous blocks before the rest of the network could verify the ledger’s correctness. That type of attack is too costly for major blockchains like Bitcoin or Ethereum.
Hacked crypto accounts are typically linked to lax security at a centralized exchange. It is significantly more safe to store your crypto assets in your own wallet.
5. Privacy
Because you do not need to open an account with a financial institution to use cryptocurrencies, you may keep your transactions private. Transactions are pseudonymous, which means you have an identifier on the blockchain – your wallet address – but no particular information about you.
In many circumstances (both innocent and criminal), this amount of anonymity might be desired. However, once a wallet address is linked to an identity, all transaction data is made public. To strengthen the privacy of cryptocurrencies, there are numerous approaches to further hide transactions, as well as several coins that are privacy-focused.
6. Transparency
All crypto transactions are recorded on the publicly available blockchain ledger. Anyone may use tools to search for transaction details, such as where, when, and how much cryptocurrency someone transferred from a wallet address. Anyone may see how much cryptocurrency is held in a wallet.
This kind of openness has the potential to decrease fraudulent transactions. Someone can demonstrate that they transferred money and that it was received, or that they have the cash available for a transaction.
7. Diversification
Cryptocurrency can provide investors with an alternative to traditional financial assets such as equities and bonds. While there is insufficient historical data on the price activity of the crypto markets in comparison to stocks or bonds, the prices appear to be uncorrelated with other markets thus far. As a result, they can be a valuable source of portfolio diversity.
You can achieve more consistent profits by mixing assets with low price correlation. If your stock portfolio falls, your cryptocurrency asset may rise, and vice versa. Still, crypto is often quite volatile, and if your asset allocation is overly heavy on crypto, it may wind up boosting the volatility of your total portfolio.
8. Inflation protection
Many people believe that Bitcoin and other cryptocurrencies provide inflation protection. The total amount of coins that will ever be created in Bitcoin is strictly limited. As the money supply expands faster than the Bitcoin supply expands, the price of Bitcoin should rise. There are various other cryptocurrencies that incorporate supply-control systems and can operate as an inflation hedge.
Conclusion
With all of the advantages cryptocurrency provides over fiat currency and other asset classes, it’s difficult to claim that using or investing in cryptocurrency has no value or benefits. several users who seek rapid and safe transactions enjoy the functionality provided by several cryptocurrencies.
And, with fewer technological impediments, it will only become more accessible over time. When the benefits of diversity and the possibility to hedge against inflation are considered, the advantages of adding crypto or crypto stocks to your portfolio begin to pile up.