Unless you have been living under a rock for the last few years, chances are you have at least heard of cryptocurrency. Cryptocurrencies have experienced a huge surge in use and acceptance all around the world over the past decade. They are an incredibly hot topic not only in the financial world but on mainstream news sites and the nightly news. Cryptocurrencies have risen incredibly fast, but why? What is it about this new form of digital currency that excites people? Here we will discuss four major reasons for the rapid rise of cryptocurrency.
Security
Cryptocurrency is a digital currency based on blockchain technology. The different forms of cryptocurrencies are protected by cryptography (which helps it get its name). The security measures related to blockchain technology and cryptography make this form of currency almost impossible to counterfeit, spend more than once at a time, or hack. Blockchain is a digital ledger on every single movement of each cryptocurrency coin. It is nearly impossible to hack or to make the coin simply disappear. There will always be a record of where the coin is. The cryptography component creates a heavy layer of encryption when the coins are moved. It is the digital equivalent of signing a check but far more secure. The encryption creates a virtual signature that can’t be hijacked or duplicated.
In a world where credit card fraud and identity theft are rampant, the fact that cryptocurrency is (currently) almost unhackable has made investors and early adaptors sit up and take notice. Although criminals tend to be ahead of the authorities and the people who create security measures, cryptocurrencies are designed to be inherently secure. This doesn’t mean there is no opportunity for criminals to exploit some vulnerabilities in the system. But, it is still extraordinarily more secure than our current financial system.
Fewer fees
Almost everything you do with your money involves fees. Moving money, using money, borrowing money, and even converting money to cash when you take it out of an ATM can have a fee slapped on it by a bank or financial institution. This creates the major reason financial institutions are so powerful and that the people involved in them continue to get richer all the time. Since cryptocurrencies are not issued or housed by a centralized organization, there is no organization that puts fees on transactions involving digital currency.
This lack of centralization makes cryptocurrencies a much more populist form of currency than the fiat currency available now and is what has driven much of its popularity. People are drawn to the ability to use all their own money for their own purposes and not contribute to the rich getting richer with every transaction they make. This simple reality has contributed to its rise so far; it is also what scares financial powers. This independence from financial institutions could also ultimately get in the way of cryptocurrency’s long-term acceptance and adoption.
Freedom
As stated above, cryptocurrency is a decentralized form of currency; it is not issued by any one central governmental body. This makes it different from the rest of the world’s currencies. Cryptocurrency is not burdened with any governmental regulations and is universal. You can use cryptocurrency without borders and do not have to worry about whether it is accepted in any part of the world or even exchange rates. This may change in some ways going forward, though. Governments are taking notice of cryptocurrency as it becomes more popular and are starting to introduce more regulations to either help keep people and countries safe (what they say) or to exert more control where they currently have none (what critics say).
That this digital currency is almost anonymous has helped boost its popularity in many circles. Although many people love the idea of financial privacy in general, to the average, law-abiding citizen this may not be super-important. To certain groups, however, it is incredibly important and has led to cryptocurrency’s popularity with these people. The rich and famous like the anonymity that accompanies cryptocurrencies because their bank accounts and high-end purchases make them targets for criminals. Being able to use their money anonymously makes them feel more secure. The other group loving anonymity is criminals and, unfortunately, that has become a factor in the rise of cryptocurrency. The spending of cryptocurrency on illegal, dark web websites reached an all-time high at the end of 2019.
Excitement
Cryptocurrencies are exciting and new and speculative which has drawn many people to the action. The cryptocurrency market is known for wild swings that make millionaires overnight or can wipe out a person’s investment at a moment’s notice. This form has become very popular with young investors with a high risk tolerance as well as adrenaline-junky investors who have historically been drawn to things like day trading or online poker in the past. If the stock market or the poker table is not enough action for you, cryptocurrency trading is where all the excitement is nowadays. If you want a solid overview of cryptocurrency day trading strategies, this Cove Markets article is a good starting point.
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The other type of people who are drawn to cryptocurrency and are helping boost its overall popularity are early adopters. These people, who had an iPhone as early as 2007 and downloaded the Uber app in 2011, want to be among the first to take on the newest tech so they can say, “I remember when”, and “I was there first”. Whether or not cryptocurrency is the future of money or just a flash in the pan, these early adopters will always be ready to increase popularity by being in on the ground floor.
Conclusion
In 2008, cryptocurrency was largely theoretical. Just 12 years later billions of dollars’ worth of it are traded on the market. The enhanced security, absence of fees, freedom from government oversight, and the excitement of the market have all been major contributing factors to its surge in popularity. Whether these factors will continue to enhance its growth or other factors will slow its trajectory is yet to be seen but it will certainly be interesting to watch in the coming years.
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