Did you think ten years ago that cryptocurrency will replace money? Maybe, but you were almost a unicorn at that time. But today, the soaring price of cryptocurrencies such as Ethereum or Bitcoin during the Covid-19 pandemic has revived many people to think about cryptocurrencies. It is yet uncertain whether Bitcoin will replace existing traditional currencies. However, the emergence of ‘cryptocurrencies’ and ‘stable coins’ prompted the central bank to inquire about cryptocurrencies.
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Will Cryptocurrency Replace Money?
What Is Bitcoin?
Bitcoin is a decentralized cryptocurrency or virtual currency. Simply put, it is a peer-to-peer (P2P) version of electronic cash. This process enables the direct sending of online payments from one party to another. All this without the need to go through or seeking the permission of any financial institution.
You automatically own an address or password containing the cryptocurrency once you own a Bitcoin. You can send this cryptocurrency from one address to another by generating a transaction. An immutable public ‘block’ documents this transaction. These connected blocks form a Blockchain, a record available to the public containing all the historical Bitcoin transactions.
What Is Mining?
The networkuser who earns a newly issued Bitcoin reward creates these blocks once every 10 minutes. A computing system guesses a considerable number randomly repeatedly. The system awards the new bitcoin will to any user who thinks closest to this number. You call this process mining. The mining rewards’ size often tends towards zero over time, making sure the amount of Bitcoin in circulation is not more than 21 million.
What Are Stablecoins?
It is a cryptocurrency that has its market value or quality pegged to another pool of assets. If traditional cryptocurrencies have a floating exchange rate, their price is permitted to fluctuate; stable coins have a stabilized exchange rate, meaning that a central authority’s assurance steadily holds their price. Tether is the most commonly used stable coin, which the Tether Corporation supposedly pegs at a 1:1 rate to the US dollar.
Why Do People Make Use Of Tether Rather Than The Us Dollar?
Transacting cryptocurrency with traditional money, particularly in large quantities, can inflict hefty compliance costs. Using Tethers instead of US dollars, regular crypto traders do not have to impose these costs as often. The majority of financial institutions have always been hesitant to make any deal with the Tether Corporation because of Tether’s possibility to promote money laundering. Also, the corporation is presently under investigation by the state of New York.
Will Cryptocurrency Replace Money?
With the great potentials these cryptocurrencies and stable coins have, it is easy to say that they can easily replace our traditional currencies. However, there is still uncertainty about these digital currencies replacing money. Some countries and financial organizations are still skeptical about these digital currencies because of their independent capacity without any regulating third party authority. There is also the fear of cryptocurrencies promoting money laundering and other financial crimes. However, we can solve the uncertainty puzzle of a digital currency replacing money if systems appear to check or monitor transactions that can cripple its credibility.
Can Cryptocurrency Replace The Dollar?
Why It Can´t Replace The Dollar
The simple answer is, No! There are notable differences between the two. US dollar is a traditional currency while the other(cryptocurrency; Bitcoin and stable coin) is a tech-based currency. One consists of paper, while the other is a collection of bits. One is tangible while the other is not.
The FED regulates the US dollar, supported by the government, and it’s easy for banks to follow money trails. Intelligence agencies, law enforcement, financial institutions, and governments all work together to detect, monitor, and report illegal transactions.
Financial institutions are responsible for how people’s money is protected and managed. There are regulations, rules, and severe consequences when these institutions and people break the law. A cryptocurrency (Bitcoin), on the other hand, is decentralized (P2P), and a public ledger validates its transactions found on Blockchain technology. There are no rules and regulations, no guarantee, no bank, and no government. A cryptocurrency (Bitcoin) is a store of value, an investment option, an exchange medium, and a digital wallet.
Further reasons why Bitcoin might find it difficult to replace the US dollar:
1. Technology And Regulation
Simply because a community is obsessed with cryptocurrency technology and is skeptical of central banks doesn’t mean regulators would stand aside and allow technology to make them insignificant. Ohio was the first state in the United States to accept cryptocurrency(Bitcoin) for tax payment. However, they abandoned the plan after a report stated that Ohio’s Bitcoin tax program was illegal. This plan is an indication of how tough it is to embrace technology without first understanding its implications.
2. Volatility Of Cryptocurrency
The volatility and inconstancy of Cryptocurrency (Bitcoin) as a store of value is a considerable risk. It’s not strange for Bitcoin to lose 15% of its value within a few days. Imagine borrowing in Bitcoin; it would emotionally and financially drain you if there is devaluation.
3. Illegal Transactions
There is a real threat of terrorism financing, money laundering, and tax evasion if these digital currencies replace the paper bill. The fact that you can’t trace some cryptocurrencies makes them a potential asset for terrorists and criminals. They can easily engage in illegal acts, collect and transfer the proceeds wherever desired without the fear of being detected by law enforcement agencies.
How Will Cryptocurrency Affect Banks?
Today, cryptocurrency is now enabling people who couldn’t access trade and finance some years back. This unrestricted access will raise many out of poverty. Thanks to cryptocurrency, those who have not been previously given a chance or considered by traditional banking now have the privilege of financing options. With access to cryptocurrencies, there will not be the need for people to interact with banks and, they will be able to avoid bank charges on transactions.
According to the report by HSBC, more than 500 banks were closed in the UK between 2015 and 2016. There was a report that there is a more than 40% decrease in the number of people visiting the bank. At this point, it is essential to say that the digitalization of the banking process like online banking will also affect that or already affected it.
Conclusion For Banks
When we consider all these things, it is easy to conclude that Cryptocurrencies will hurt the banking landscape. If these Cryptocurrencies continue to surge in popularity, there is a high possibility that physical banks may finally become obsolete. It’s too early to suggest the best approach for both the bank and the creators of Cryptocurrencies, but change will likely happen.
Can You Day Trade Bitcoin?
Did you know that you can buy and trade bitcoins like any other currency? By now, there are plenty of platforms for trading cryptocurrency. We want to introduce you to the new trading platform, eToro.
The best way to obtain cryptocurrencies in the United States is to use a licensed cryptocurrency exchange. Unlike many other trading platforms, eToro allows the purchase of cryptocurrencies that can be traded on the trading platform and stored as savings in the account. Users can trade digital currencies just like any other trading platform. You don’t have to bother to use Fiat for buying and trading digital currency, and eToro makes it very easy to do so with its CopyTrader feature. The platform operates in over 60 countries outside the United States and offers cryptocurrency trading in 38 states and territories.
Getting started: eToro
Disclaimer: eToro USA LLC; Virtual currencies are highly volatile. Your capital is at risk.
How Long Does It Take To Buy Bitcoin?
If you use a peer-to-peer exchange platform such as Paxful or CoinCorner, to name a few, you can get your Bitcoin as soon as they complete the transaction. Frankly, there is no fixed timeframe for buying Bitcoin, but a Bitcoin transaction can take anywhere from a few hours to a day to appear in your digital wallet, depending on the transaction method. If you use more conventional methods such as bank transfers, it may take some time (1-3 days) due to the lengthy verification process.
The Bottom Line
The continuous rise of Cryptocurrencies has raised many questions about their possibilities of replacing traditional currencies and the fate of physical banking. The information in this article should give you a hint of the likely outcomes of these questions. It is still exciting to see what is going on in this sector, so keep a closer eye on that.