The future of currency is digital

Digital currencies can completely change society’s attitude towards money. The rise of Bitcoin (BTC), Ethereum (ETH) and thousands of other digital cryptocurrencies has prompted global central banks to look into how other digital currencies would work.

Cryptocurrencies have evolved from digital novelties to trillion-dollar technologies that have the potential to disrupt the global financial system in just a matter of a few years. Bitcoin and hundreds of other cryptocurrencies are increasingly considered great investment options and are used as currency to purchase goods and services such as software, digital goods and many other products or services.

For its many supporters, cryptocurrencies are a democratizing force that takes the power to create and control money away from central banks and third parties. Critics, however, argue that the lack of regulation of cryptocurrencies encourages illegal activities, while the asset itself increases inequality, suffers from wild market volatility and wastes energy. However, more and more countries are starting to put together very strong regulations so that people around the world can use crypto safely, while also benefiting the economy.

As of now, tens of countries, including the United States, are planning to introduce their own central bank digital currencies (CBDCs) to add to the cryptocurrency enivronment.

Reasons why digital currency is the future of money

The evergrowing adoption of digital assets backed up by blockchain technologies is improving the pace of innovation in the financial sector and capital markets. Blockchain technologies offer new paradigms for trusting decentralization, and for central bank digital currencies (CBDCs) promise:

• Better efficiency (less complexity, risk, delivery time),
• Book sharing as another paradigm of system sustainability,
• Transparency increases competitiveness, which reduces costs and financial inclusion,
• Better control and faster transmission of monetary policy through integrated planning,

The beginning of decentralization

We have entered an age where we alone can own and control all our possessions. Decentralization provides economic freedom that cannot be undermined by banking and government stability. Since there are no third parties involved, it can provide greater transparency and security in transactions. Networks built on blockchain do not require trust or knowledge from other people and Decentralized Finance (Defi) as a system can easily replace traditional financial processes for obvious reasons.

Peer-to-peer transactions

“Saving extra transaction costs” is a big persuasive factor for everyone. Traditionally, the presence of intermediaries in the financial blockchain causes additional costs for transactions. The principle is simple: more parties, more extra costs!

The appeal of P2P transactions is that you can transfer ownership of assets or real estate without the involvement of a third party. Peer-to-peer is transparent, secure and less complicated. In short, peer-to-peer transactions offer privacy without the added cost of transfer.

Easy to use

We spend valuable time in long queues because of beauraucracy, filling out forms and invoicing just to send and receive money. Similarly, traditional banking systems usually don’t work on holidays so financial transactions can be processed only after that, resulting in a bothersome delay.

However, the rise of digital currencies opens the door to endless possibilities. The undeniable advantage of digital currencies is their ease of use. With a smart device, you can be your own bank and make transactions much easier and faster without having to wait for transactions to process for days on end.

Fraud prevention and transparency

We live in constant fear of whether or not the bank information we provide will lead to breaches or will third-party systems monitor our transactions and usage. The digital currency concept focuses on user privacy, so data breaches are rare because it contains limited personal information. All transactions are encrypted between “digital wallets”, resulting in an accurate parity calculation in the ledger. Basically, with this kind of security, blockchain technology is poised to disrupt every aspect of our existence.

All in all, the creation of a central bank digital currency is quite a complex decision. Central bankers around the world are therefore weighing the pros and cons. However, the question is not if digital currencies will become an alternative to traditional currencies, but when.