Cryptocurrencies will change the world more than many can imagine. Understanding the potential of cryptocurrencies and increasing their use will inevitably lead to a situation where many of the problems and challenges familiar today will become history in the future. This document presents how cryptocurrencies are revolutionizing the world and explains how this is possible in practice.
The cryptocurrencies behind the change
Currently, there are several thousand different cryptocurrencies on the cryptocurrency market. Regardless of many cryptocurrencies, it is safe to say that the most significant social impacts will culminate in Bitcoin and Ethereum. For this reason, it is good to review the activities of these two giants of the cryptocurrency world in a little more detail. After introducing how Bitcoin and Ethereum work, it’s time to consider how cryptocurrencies, led by Bitcoin and Ethereum, are changing the world.
Bitcoin
Bitcoin is the cryptocurrency in fully digital form based on blockchain technology. The maximum number of bitcoins is 21 million and, unlike traditional currencies, it is impossible to create bitcoins indefinitely. New bitcoins are created in the world in a process called mining. In addition to creating new bitcoins, mining also involves confirming transactions on the blockchain.
Bitcoins can be transferred anywhere in the world without third parties such as banks and payment intermediaries. This means that bitcoins generally move from one address to another very quickly and at low cost.
Unlike traditional currencies like the euro and dollar, Bitcoin is not managed by a single entity. As a result, it is completely impossible for an individual, such as a central bank, to control the functioning of bitcoin.
Bitcoin’s popularity among investors has been growing strongly in recent years. The explosive growth of Bitcoin’s popularity can be seen against the background of, for example, the reckless monetary policy of central banks and the predictability of bitcoin, which is reflected, for example, in the maximum number of locked bitcoins. Bitcoin’s unique features allow Bitcoin to offer an excellent alternative to both traditional investments such as gold and stocks and to traditional currencies (e.g. the euro and the dollar).
DeFi and Ethereum
Apart from Bitcoin, there are many other cryptocurrencies in the world of cryptocurrencies that can have a revolutionary impact on people’s daily lives. Of these, the most comprehensive platform solution in the world of cryptocurrencies, called Ethereum, and the strongly linked decentralized economic entity, also known as DeFi (Decentralized Finance), stand out. Before introducing DeFi, it’s a good idea to brush up a bit on the operating principles of Ethereum, as well as the differences between Ethereum and Bitcoin.
Ethereum operations began in the summer of 2015, and today it can be rightly said that Ethereum is one of the largest and most popular cryptocurrencies in the world. In addition to decentralized economy (DeFi) applications, Ethereum also allows the programming of various smart contracts and distributed applications (dApp). Applications built on top of Ethereum often make multiple third parties, such as banks, redundant. Ethereum allows applications to function without third parties as its blockchain is completely decentralized and not under the control of a single party. Most cryptocurrencies that have entered the market in recent years have also been built on top of Ethereum.
Ethereum has a completely different operating principle compared to bitcoin. Bitcoin can primarily be seen as a digital payment system and medium of exchange. Ethereum, on the other hand, is a distributed blockchain platform on which almost anything can be programmed. A good example of applications programmed on top of Ethereum are the numerous DeFi applications that will shake up our understanding of banking services.
Currently, DeFi is growing rapidly and allows people around the world to provide services almost completely similar to those of traditional banks. DeFi enables a completely open market that works more efficiently than the conventional banking system. Thanks to DeFi services, people who previously did not have access to traditional banking services can now enjoy benefits similar to those of Westerners. Various DeFi services have also gained enormous popularity among investors. Currently, traditional banks do not pay interest on deposits in practice, so the annual interest rate of several percent offered on DeFi services naturally seems very attractive to investors.
Problems solved by cryptocurrencies
Under the leadership of Bitcoin and Ethereum, cryptocurrencies will provide a solution to several important challenges facing humanity. Many of these problems may be foreign to Westerners, but they are quite common in many countries around the world.
- Start a business
The availability of banking services is essential for conducting business. Banks make it possible for businesses to accept payments and send money around the world. However, many people in the world are still not covered by banking services, so doing business is also very difficult. With cryptocurrencies, people can manage their wealth and access banking-like services from applications built on distributed blockchains. Thanks to cryptocurrencies, the lack of a bank account is no longer an obstacle to starting a business anywhere in the world.
- Economic freedom
Distributed cryptocurrencies like Bitcoin allow people to have complete financial freedom. The Bitcoin blockchain is completely decentralized, so no party can influence its operations with their own actions. Thanks to Bitcoin, people no longer need third parties to manage their wealth, and the value of wealth does not depend on the monetary policy decisions made by central banks. People can accumulate, manage and send their wealth any way they want.
- Protection of property rights
Many people around the world have in the past been unable to preserve their wealth safely without fear of being robbed. Many of the world’s poorest countries are very volatile and the risk of being looted is high. As a result, preserving wealth in physical form is very risky. With cryptocurrencies, people who had not previously been able to save to improve their standard of living can now save without fear of being robbed. Savings are essential so that people can improve their standard of living in the future.
- Money transfers
Cryptocurrencies revolutionize the way people send money to each other. Cryptocurrencies led by bitcoin allow people to send and store value without a bank account. Thanks to Bitcoin, people have the opportunity to manage their own wealth digitally for the first time. Additionally, due to the absence of third parties, money also moves to its destination much faster than traditional systems.
- Human rights
According to the UN Declaration of Human Rights, everyone in the world should have the right to own property. However, this right cannot always be exercised, as in many countries around the world, banking services and property rights may be prohibited for some groups of people.
Bitcoin and other cryptocurrencies are revolutionizing the lives of the most vulnerable, especially the most vulnerable. No one can madly restrict people’s right to property or people’s access to their wealth anymore. Bitcoin and its ever-growing infrastructure are also having an unprecedented impact on how humanitarian aid is distributed. Organizations no longer have to depend on corrupt rulers, since it is possible to channel aid directly to those who need it most.
- Economic inequality
Cryptocurrencies, particularly the various decentralized economy (DeFi) applications built on Ethereum, are also helping to reduce economic inequality. DeFi is a fully decentralized entity, whose services can be used anywhere in the world. DeFi makes the familiar services of traditional banks also available to people who in the past could only dream of the services provided by banks, such as taking out a loan or earning interest. Furthermore, DeFi is also much more efficient than traditional banking services, which is why Western countries have also begun to wake up to its revolutionary potential. Why keep your money at zero interest in a bank account when at the same time it is possible to earn up to several dozen interest income from different DeFi services?
- Equality
In many emerging countries, opening a bank account is much more challenging for women than for men. The lack of a bank account already tends to weaken women, who are much weaker than men. According to research, the lack of a bank account is often an obstacle to starting a small business. In emerging countries, small businesses are the only way to improve living standards. In the absence of a bank account, improving living standards and tackling inequality is extremely difficult.
