Cryptocurrency has been taking over the world since 2008. People around the globe have spent billions of dollars on the new all-digital form of money. Why are cryptocurrencies so popular? And why do more and more people buy Bitcoin nowadays?
Cryptocurrencies can offer things that have simply never been possible before. Let’s take a look at some of the core reasons why people are so keen to ditch traditional forms of currency in favor of cryptocurrencies.
1. Mistrust in the current financial system
Bitcoin was revealed to the world in the aftermath of the 2007-2008 global financial crisis. It introduced an entirely new way of thinking about money, finance, and banking. During this time, people around the world were hit hard by the reckless behavior of the big financial institutions, and the inability of governments to regulate them. There was a huge feeling of mistrust in the whole system and a strong desire for something new to come along.
Moreover, fiat currency owners keep on being the most desired victims of criminals. Needless to say, cash can be stolen from your pocket pretty easily and with near to zero chances of finding the criminals. Even more: recent research has proven that money laundering is 800 times less common with cryptocurrency than with fiat. Simply put, traditional money is a wide-used tool for financial criminals.
This turned out to be the perfect environment to introduce a new kind of currency. People quickly saw the value in Bitcoin and jumped on board to make it one of the fastest-growing new technologies in history.
The big difference with Bitcoin is that it is decentralized. It means that no company, government, or organization has complete control over the currency. This is in stark contrast to traditional currencies like the US dollar. The US government can effectively create as many US dollars as they want, shrinking their value. This happened on a vast scale after the global financial crisis. They can also repossess US dollars from anyone at any time.
Bitcoin and cryptocurrencies offer a new form of currency that isn’t controlled by any single authority. It can’t be seized, and can’t be inflated away by an irresponsible government. This has been the biggest reason why cryptocurrency has taken off so far.
2. Getting rich quick
Unfortunately, the technological and ideological strides of cryptocurrency are often overshadowed by the soaring and collapsing prices. Many people don’t really care that it’s decentralized, they just want to buy some cryptocurrency to make a quick buck.
Many of those that bought into Bitcoin in the early days became overnight millionaires. There are countless stories of regular people and early investors that have made a fortune on Bitcoin with a relatively small initial investment. These stories capture people’s imaginations and make them want to become rich also.
It’s this mindset that has sent the prices of cryptocurrencies to their rollercoaster ride. The bubble of 2017 was driven by people wanting to get in on the soaring prices. The subsequent crash was due to those same people fleeing the market as soon as things turned south.
There have also been many cryptocurrency companies and projects that saw an opportunity to take advantage of the limited regulations in the space. They aimed to raise the value of a certain token as quickly as possible, without delivering much value to the world.
This get-rich-quick method has caused many to lose passion for the whole cryptocurrency project. Still, the promise of fast profits remains a key driver of cryptocurrency and Bitcoin enthusiasm.
3. New financial applications
Another reason people are attracted to cryptocurrencies is the brand new alternative financial applications. These are called “decentralized finance” or DeFi apps for short.
Some of the top DeFi apps offer innovative approaches to peer-to-peer lending. Compound Finance is one such approach. In their decentralized system, users can lend money in any amount, without leaving these funds in the control of Compound. Everything is done automatically with smart contracts on a blockchain.
dYdX exchange is another interesting DeFi application based on cryptocurrency. It’s a decentralized way to borrow and lend money for cryptocurrency trading. dYdX is also a “trustless” application, so you never have to give up control of your funds to access the benefits of lending and borrowing. There’s also no signup or verification needed to start trading immediately.
Another example of a new application made possible by cryptocurrency is CryptoKitties. It’s a game where you can use your Ethereum tokens to buy, sell and breed digital kittens on the Ethereum network. Each kitten is cryptographically unique and potentially worth thousands of dollars.
These new applications aren’t possible with traditional currency and will continue to be a big drawcard for the world of cryptocurrency.
4. Low-cost cross-border payments
Perhaps one of the biggest incentives for financial companies to start experimenting with cryptocurrency is the possibility of low-cost international payments. International payments are still very expensive and difficult to manage for banks. By taking advantage of new technology, many banks are hoping to develop more competitive services to win new customers.
Projects like Ripple are taking the lead on this. The enterprise-focused cryptocurrency network is built to allow cheap and instant payment settlements across borders and institutions. This would do away with expensive international conversion fees and long wait times.
Of course, not all banks are keen on this shift. Many big banks earn healthy profits from being the middleman in international transactions. The last thing they want is for a technology to come along that makes that cash cow completely obsolete.
More reasons to come
There are a plethora of reasons why people and organizations are drawn to alternative currencies. Traditional government currencies are the world standard, but they certainly aren’t the only way of doing things.
Cryptocurrencies have introduced whole new ways of using money. Sure, many are in the industry to make some quick cash, but the true possibilities of cryptocurrencies are only just coming to light. As cryptocurrency networks improve and applications develop, there will be even more reasons to choose cryptocurrency over traditional currencies.