Change in the financial system due to cryptocurrency and Blockchain technology

4 Things That You Should Learn Before Buying The First Bitcoin!

Since the introduction of Bitcoin, cryptocurrencies have become a popular phenomenon all over the world.

It is believed that due to its immense potential as a digital currency it has the ability to replace Fiat money and become the primary currency across the world.

When cryptocurrencies were introduced with Bitcoin it was an obscure concept. Satoshi Nakamoto proposed a peer-to-peer digital currency that would make transactions faster and more secure.

Cryptocurrency is the first real-life application of blockchain technology that was designed to track any assets.

Today, multinational corporations like Tesla, financial institutions like JP Morgan and PayPal have already invested in Bitcoin technology to make transactions faster and more reliable.

Traders are also making investments through trading applications view because cryptos are also considered stores of value.

What is the factor that makes cryptocurrency stand out? What makes corporations and institutions choose this innovative technology over the existing traditional letter system used in banks and other financial institutions? In what way has this new digital currency revolutionized the economic infrastructure all over the world? Let’s find out.

The blockchain technology

Blockchain is a ledger technology that is used to run the cryptocurrency network. This technology can be used to track assets accurately. The Bitcoin tokens are any other cryptocurrency tokens at digital assets that can be tracked through blockchain technology.

The blockchain ledger system is a public ledger system that is not regulated or controlled by a single authoritative body. Instead, it is accessible and maintained by a network of computers known as the notes that verify and audit transactions over crypto networks.

Blockchain consists of blocks of transaction details letter placed in linear continuity, every block is connected to the other block in a logical manner. Blockchain ledger system is considered immutable because once blocks are added they cannot be changed or modified. This makes the blockchain a secure mode of transaction.

How cryptocurrencies and blockchains have affected the economic infrastructure

The blockchain ledger is very much different from the traditional laser that is used in the existing financial system such as banks. These are the reasons why blockchain has improved the existing financial infrastructure.

  1. Faster transaction– Normally overseas transactions through the banking system take around 3-4 days to complete. The intermediate verification at banks has a long waiting time. In the blockchain ledger system, the ledger is accessible simultaneously by all the miners in the network. It is for this reason bitcoin transactions usually take a couple of minutes to complete.
  2. More secure– The traditional ledger in the banks are manually maintained and are prone to error. Double spending is one of the most common errors in the traditional ledger system where the transaction in one bank is not registered in the ledger of another bank which creates unaccounted currency tokens. Since bitcoin transactions are verified and tallied against the public ledger by all the computers, errors such as double spending can be successfully avoided.
  3. Counterfeit currency problem- It is possible to add counterfeit currencies into circulation as it is impossible to account for the total currencies that are in circulation. The tokens in cryptocurrencies are digital assets that are tracked through the blockchain system, which makes it impossible to add counterfeit currencies into circulation. In the blockchain system, every single token is always accounted for.

Disadvantages of the cryptosystem

However no system is perfect, and the blockchain also has several disadvantages.

  1. Because they are not regulated by the government or similar bodies, transactions can be made anonymously over the crypto networks. This has attracted a lot of illicit money laundering activity, where illicit investments are made in crypto assets to make illicit money appear legitimate. This affects the overall economic system.
  2. Bitcoin mining consumes a lot of energy which may have a negative impact on the environment.

Conclusion: Despite all the advantages and disadvantages it can be acknowledged that the blockchain has taken the global financial infrastructure a few steps forward.

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