Modern financial institutions and their money themselves have already weakened and are being manipulated by governments and banks. How does the cryptocurrency solve these issues? What makes cryptocurrency different from government and weak paper money?
Advantages of cryptocurrencies
- Reducing confidence
- Decentralization
- Persistence
What is depreciation?
In the case of paper currency, you need to trust a third party to ensure your money is valuable and not lost. Given the fact that the bank lends your money to others, you do not actually have the money in your bank account. What you really own is just the promise they give you; banks are money-making machines.
The fact that they can lend up to 9 times the money they then keep is scary enough to start asking yourself which money you already have in the bank is safe.
For every $ 1 they can loan out $ 9.
Cryptocurrency removes this need to trust someone by incentivizing every actor in the network not to commit fraud.
In simple terms, reducing trust: it means that no person is required to trust any central entity or counterparty for the network to function.
What is decentralization?
With banks and governments, saving and creating money by issuing currency and interest rates are at their own discretion. Users of government-controlled currency are at their mercy.
However, with cryptocurrency, no individual or union can influence the supply of the coin or exert significant influence over it without the consent of the majority.
Even if there is no majority approval, the minority is free to “dump” and manage its own version of the currency. In the 1920s in the Weimar Republic (Germany), due to hyperinflation, German paper money lost its value and people began to use cigarettes as a method of payment.
In simple terms, decentralization is: the blockchain policy is decentralized (no one controls it) and decentralized design (there is no point of failure for the infrastructure).
What is persistence?
When we want to check how money is withdrawn from our bank accounts, we can refer to our transaction history with the bank, and that means doing a few things:
- We have confidence that the bank does not create fake transactions and manipulate our money.
- We have confidence that the bank delivers outbound transactions to our intended recipients.
- The bank uses adequate security to ensure that other parties are unable to conduct these transactions on our behalf.
When the element of trust and centrality is removed from the equation, there is no longer anyone to trust to do so. As a result, records should be public and immutable. And the secure nature of cryptocurrency encryption guarantees this.
While it is not impossible to change ledger transactions, it is extremely difficult and requires you to oppose users of the entire cryptocurrency network.
In simple terms Stability means, Transactions cannot be undone:
- It should be unlikely or difficult to rewrite records;
- It must be impossible for anyone except the owner of the private key to transfer the money associated with this private key;
- All transactions are recorded in the blockchain.