Some years back, talking about the importance of cryptocurrency in our world would be funny. For many people, the concept of cryptocurrency painted funny pictures. Maybe an underworld banking system where traders wearing hoodies sit behind weird computers.
Today, the concept is everywhere. People discuss it in business magazines, financial analyses, and news reviews. Some publications even dedicate their front pages to cryptocurrency talks.
In addition, some countries have accepted cryptocurrency today, while others are setting up rules and regulations around it.
Based on how things are developing, some people ask, “is cryptocurrency even the right name? Should it be called Virtual or Digital Currency?”
Well, the proper name is not as important as what we should ask ourselves. “Is cryptocurrency supposed to get the kind of attention it is getting?” “What is its impact on our world today, and why should we care about it?”
What is Cryptocurrency?
Cryptocurrency is a decentralized digital currency. It is a financial system built on the blockchain, and a central authority does not control it.
A community of peer-to-peer computer networks maintains the system. In addition, these computers are called nodes.
Furthermore, cryptocurrency works via cryptography, and most get their security through mining—for example, Bitcoin. Primarily, bitcoin mining is a process that involves entering information on the blockchain network.
Before the node adds a piece of information, the node will have to solve complex mathematical problems. Any node that provides the answer gets the chance to add a block to the blockchain network.
These blocks contain verified transaction information of users on the network. Once the transaction is confirmed and added to the blockchain, it becomes immutable.
Why is Cryptocurrency Important?
There are thousands of cryptocurrencies in the blockchain ecosystem, but we will focus on Bitcoin and Ethereum here.
Bitcoin
Bitcoin is the first cryptocurrency built on the blockchain network. It was developed in 2008 by a group under the pseudonym Satoshi Nakamoto. Since then, this cryptocurrency has increased in value tremendously.
For instance, if you bought $100 worth of Bitcoin in 2010, in 2018, it should have been worth over $100 million. In 2022, you will have over $200 million. So, you will be among the first billionaires that the bitcoin investment produced.
Also, the number of companies and investors buying into this financial technology is increasing daily. Moreover, more retailers are now accepting this cryptocurrency as a payment method.
Ethereum
This cryptocurrency is similar to bitcoin. However, it goes beyond mining. First, Ethereum runs on a separate blockchain from bitcoin. Also, the cryptocurrency focuses on powering decentralized financial applications and their interoperability.
Furthermore, Ethereum provides developers with a programming language already in its blockchain. So, developers can write smart contracts on the Ethereum blockchain using this programming language.
These smart contracts serve many purposes, including transacting with Ether (the blockchain’s native currency).
Before December 2017, the crypto ecosystem witnessed rises in crypto prices. So. that time became the wrong time to purchase cryptocurrencies.
In December 2017, the market crashed, and the ecosystem lost over 20% of its entire market capitalization. After that, the prices began to go up again. Then in January 2018, exchan1ges crashed, with Ethereum’s price going down by 25%, as well as other cryptocurrencies.
Buying Cryptocurrencies
By this time, regulators began to issue notices warning investors to beware of buying. So, from what happened between 2017 and 2018, it became clear that the cryptocurrency ecosystem is very speculative and volatile. Wrongly investing in the ecosystem can lead to losing all your money.
Although cryptocurrency is more speculative and volatile than the stock market, it has come to stay. The blockchain and cryptocurrency are not going away anytime soon, not even in 100 years.
This technology is gradually replacing traditional finance and facts, global, secure, and digital. In addition, the transaction minimizes fraud by allowing everyone to see all the transactions that happen there.
Furthermore, bitcoin is not affected by inflation. It has a limited supply (21 million bitcoins). So, there is no way more can be produced into circulation like central banks will do to cash production.
The limited supply in itself tells you that, by nature, Bitcoin is scarce. However, some people argue that cryptocurrencies generally are not since anyone can produce them.
Why Should I care About Cryptocurrencies?
A lot of our traditional institutions are now partnering with crypto organizations. For example, JP Morgan partnered with Zcash. Also, some are developing their crypto, for example, Bank of America.
With the way cryptocurrency speculations are going, the big question is not whether you should buy it or not. We have seen many price increases and positive ROIs, and it will continue to be so.
So, the big question should be, “Do I have spare money I want to invest?” If yes, there is no harm in trying then. We advise that you invest your spare money because you should only invest what you can afford to lose. Remember that the market is a very volatile one.
Currently, cryptocurrency and its wave are everywhere. Its importance is constantly occupying the major headlines and most online forums.
Also, remember that as much as we have been talking about Bitcoin and Ethereum here, there are more cryptocurrencies.
Most of these tokens are fundamentally as good as bitcoin and Ethereum. However, some others fail. Before investing, you should research and know the best cryptocurrencies to buy.
Blockchain and Cryptocurrency Importance
As it concerns importance, you must note that crypto is going mainstream gradually. Moreover, its importance is making it a widely accepted technology globally.
Cryptocurrency is gaining the traction it is getting because of its masterpiece technology. The blockchain’s decentralized technology is giving cryptocurrency the level of importance it is getting today.
The blockchain is just a platform for developing cryptocurrency tokens and coins. Also, like recording crypto transactions on the blockchain, other transactions can be recorded there, too—for example, medical records, immigration records, insurance policies, and birth records.
Furthermore, the use of Ethereum’s smart contracts and dApps is gradually replacing the need for traditional banking firms. People can now manage their money through a personalized digital wallet.
The use is growing, and banking institutions will have to partner with this technology to remain relevant in the coming years.
Finally, cryptocurrency has been on the scene for over 18 years, gradually displacing traditional banking systems. The importance of this technology cannot be overemphasized, although is not perfect.
It allows people to get total control of their finance and ensures privacy and control of their data. Also, it is changing how we look at money and payment methods.
It will get more popular as more people keep seeing its importance in the financial industry. If you are considering investing, be careful how you invest in it.
