Over the past few years, cryptocurrency has gained a lot of popularity, but many consumers and investors may be wondering what all the fuss is about. When the majority of transactions can be made in local currency, why would anyone choose cryptocurrency? Why would a person put money into cryptocurrencies? In point of fact, using and investing in cryptocurrencies has many advantages. The top seven benefits to consider are listed below.
- Speed of the transaction
If you want to send money to someone in the United States, cryptocurrency is the fastest way to move money or assets from one account to another. In the United States, most transactions are settled within three to five days. Typically, a wire transfer takes at least 24 hours. Within three days, stock trades settle.
However, the speed with which cryptocurrency transactions can be completed in a matter of minutes is one advantage. Your transaction’s block is fully settled and the funds are available for use when the network confirms it.
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- Cost of transaction
Cryptocurrency transactions are relatively inexpensive in comparison to other financial services. A domestic wire transfer, for instance, typically costs between $25 and $30. International money transfer fees can be even higher.
Typically, cryptocurrency transactions cost less. However, you should keep in mind that transaction costs can rise as a result of blockchain demand. Even on the most congested blockchains, median transaction fees remain lower than wire transfer fees.
- Accessibility
Cryptocurrency can be used by anyone. You only need a smartphone or computer and access to the internet. When compared to opening an account at a conventional financial institution, the process of setting up a cryptocurrency wallet takes a very short amount of time. No ID verification is provided. There is no credit or background check.
The unbanked can now gain access to financial services without having to go through a centralized authority thanks to cryptocurrency. A person may be unable or unwilling to open a traditional bank account for a variety of reasons. People who don’t use traditional banking services may be able to easily send money to loved ones or conduct online transactions with cryptocurrency.
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- Security
Your crypto wallet’s private key is required for anyone to sign transactions or access your funds. However, you can’t get your money back if you lose your private key.
Additionally, transactions are protected by the distributed computer network that verifies them and the nature of the blockchain system. The network becomes even more secure as more computing power is added.
Before the rest of the network can verify the accuracy of the ledger, any attempt to alter the blockchain or attack on the network would require sufficient computing power to confirm multiple blocks. That kind of attack is too expensive for popular blockchains like Ethereum or Bitcoin. Poor security at a centralized exchange is frequently to blame for instances of hacked cryptocurrency accounts. It is much safer to store your crypto assets in your own wallet.
- Privacy
Because you don’t have to sign up for an account at a bank to use cryptocurrency, you can keep your identity private. Transactions are pseudonymous, which means that your wallet address serves as an identifier on the blockchain but does not contain any specific information about you.
- Transparency
The publicly accessible blockchain ledger records all cryptocurrency transactions. Anyone can look up transaction data, such as where, when, and how much cryptocurrency was sent from a wallet address, using tools. A wallet’s cryptocurrency storage capacity can also be viewed by anyone.
Transparency at this level can help cut down on fraudulent transactions. Someone can demonstrate that they have the funds available for a transaction or that they sent money and that it was received.
- Diversification
Cryptocurrency has the potential to provide investors with a means of diversification away from more conventional financial assets like stocks and bonds. Although the cryptocurrency markets’ price action in relation to stocks or bonds has only a brief history, the prices appear to be uncorrelated with other markets at this point. Because of this, they might be a good way to diversify a portfolio.
You can get returns that are more consistent if you combine assets with low price correlation. Your crypto asset may rise if your stock portfolio falls, and vice versa. However, if you allocate too much of your assets to cryptocurrencies, you run the risk of increasing the overall portfolio’s volatility due to the cryptocurrency’s generally high volatility.
The Bottom Line
It’s hard to argue that using or investing in cryptocurrency isn’t worthwhile, given all of its advantages over fiat currency and other asset classes. Many people who value quick and safe transactions find that the utility provided by many cryptocurrencies is very valuable. Additionally, there will be fewer technical obstacles, making it even more accessible over time.
