Ever since the craze in early 2017, the term “cryptocurrency” has quickly reached the mainstream sphere. People who had no clue what cryptocurrencies were are now at least aware of them. And out of all the cryptocurrencies in existence today, the one that people are most familiar with is Bitcoin. Beyond that, how these cryptocurrencies work, what they can be used for, and the future of cryptocurrency is still a mystery to most people.
Still not sure what cryptocurrencies are and how they work? To summarize, cryptocurrencies are digital assets that use cryptography to anonymize transactions. Cryptocurrencies operate on blockchains, which are decentralized public ledgers that keep track of every transaction that occurs on its network.
Combined, cryptocurrencies and their blockchains offer a wide range of use cases, many of which have yet to be fully realized. Continue reading to learn what some of the more widespread use cases are, and why cryptocurrencies, in general, are here to stay.
What are the uses cases for cryptocurrencies?
1. Digital Cash
Cryptocurrencies are becoming increasingly useful as an alternative to fiat currencies. They share many of the same properties as traditional currencies, in that they are stores of value that can be exchanged. Due to the digitized nature of modern society, cryptocurrencies offer a new way to conduct transactions over the internet.
Because cryptocurrencies are decentralized — meaning that they are not managed by a single entity such as a bank — they offer a convenient way to conduct person-to-person (P2P) payments. Sending money directly between people without needing to go through a centralized banking system that will most likely try to charge high transaction fees is of great appeal to many people. For example, cross-border transactions — or sending money to someone in a different country — can be done far cheaper and more comfortable thanks to cryptocurrencies.
Moreover, retail stores are starting to see cryptocurrencies as an acceptable payment method. As technology continues to scale, the transactions will become faster, and the fees incurred will decrease. It’s possible that eventually, cryptocurrencies will become the preferred method of payment over fiat currencies.
As mentioned before, cryptocurrencies require an underlying blockchain to work. Blockchains are decentralized networks of computers that verify every transaction through a sort of voting system. Each transaction is also cryptographically secure, and this prevents people from tampering with the ledger.
This self-governing property of blockchains is what makes them potentially useful in a political sense. For instance, political voting systems can be programmed using blockchains, thus creating a far more accurate way to tally votes and prevent voter fraud. And aside from voting in particular, any entity or organization that requires self-governance can creatively implement a blockchain to manage its systems. Smart contracts, which will be explained below, are one such element that can provide an organization with secure autonomy.
3. Digital Collectibles
By establishing genuinely unique and secure digital identities, cryptocurrencies and blockchains work in tandem to create a market for digital collectibles. Every asset on a blockchain has a unique identity, which means that each asset is one-of-a-kind. This has spawned several online companies that have leveraged blockchains to form entertaining video games utilizing collectibles.
One of the most popular crypto-based video games is CryptoKitties. CryptoKitties is a fun and potentially lucrative way to amass digital collectibles in the form of aesthetically unique digital felines. These cats cannot be replicated and are undeniably linked to its owner through blockchain mechanics. They can be traded between other players for a cryptocurrency on the popular blockchain known as Ethereum. This mechanic may extend to all video games that want to offer unique items and character skins to players.
4. Smart Contracts
Businesses can use cryptocurrencies to fulfill contracts automatically. Smart contracts are essentially digital agreements that are programmed to complete steps in a negotiation when certain conditions are met by each party involved.
Any business negotiation that would require the use of contractual agreements can be automated through blockchain technology. Fulfilling contracts in this way provides businesses with increased autonomy and security.
Since cryptocurrencies are now recognized as a valid store of value, they offer new investment opportunities for the general public. Although they are currently highly volatile, cryptocurrencies are quickly being added to investment portfolios as a way to hedge against losses in other asset classes.
Recently, the parent company of the New York Stock Exchange (NYSE) founded a new platform known as Bakkt. Bakkt is a cryptocurrency exchange platform that is meant to attract institutional investors into the crypto markets. It is huge news for the future of cryptocurrency. This is speculated to be a massive push towards the mainstream adoption of well-established cryptocurrencies such as Bitcoin, XRP, Etherium.
Cryptocurrencies are here to stay
When the crypto bubble popped in late 2017, many people immediately lost interest and wrote the phenomenon off as a fad. However, cryptocurrencies and the blockchain technology that they run on have only been maturing since then. Government regulation and an influx of passionate blockchain developers have been working hard over the years to ensure that cryptocurrencies are safer and easier to use.
Government regulation has successfully eliminated many of the scammers that capitalized on the unregulated Initial Coin Offering (ICO) system. Furthermore, large-scale moves, such as the founding of Bakkt, are proving that the government is interested in the potential of cryptocurrencies. Likewise, retail stores are gradually accepting cryptocurrencies as a valid payment method. And technology giants like Facebook and Amazon are looking at ways to enter the cryptocurrency space as well.
Additionally, blockchain projects themselves are rapidly evolving, and new use cases are being discovered and ironed out every month. Blockchain developers are a hot commodity, with salaries starting around $100,000 a year on average.
While cryptocurrencies still have a long way to go before mainstream adoption, they are currently being traded and used as a store of value by investors from all walks of life. Many investors are waiting for the day retail stores widely accept cryptocurrencies, or for their favorite cryptocurrency projects to increase in value. The future of cryptocurrency still holds mysteries, but one thing we can be confident about is they are here to stay and improve the current monetary system.