Blockchain technology has been a major disruptor (in a positive way) in industries mostly dealing with cyber security, payments, and healthcare. But of the many industries, digital currencies have gained the most leading to unprecedented growth that was unthought-of before. We are witnessing this impact everywhere and now transactions are being made worldwide through digital currencies. 

To better appreciate how phenomenal this has been, this article has done the heavy lifting and shares with you the impact digital currencies have had and continue to have with the help of blockchain innovation. But before that, let’s first define blockchain technology and digital currency. We will then look at a few of their pros and cons to help you understand them better.

What is blockchain technology?

Blockchain technology can simply be defined as a ledger that stores the ownership details of digital assets. The records are stored in a way that they can’t be modified or altered thanks to the technology’s top security measures. 

What are digital currencies?

Digital currencies are currencies that exist electronically and operate independently without the control of a central bank. They are stored and exchanged digitally over computer systems. 

To use a digital currency, you first have to buy it. You can buy them through the several digital wallets and trading platforms available. To buy an item, you will have to transfer its value in digital currency to the seller. They can then release the product to you after receiving the payment. 

Blockchain technology facilitates and records all these transfers.  Because of its secure nature, more and more people are now preferring it for purchases including those of homes or cars. You can now even do your grocery shopping and pay for it with digital currencies. Some employers now even give their workers the option of payment through digital currencies. 

As a tourist, you can now rent a car and pay through digital currencies as more and more companies continue to embrace them. Visit Rental24h.com for all your car rental needs and to answer questions like where to rent an SUV AWD, SUV rental options or even SUV AWD vehicles to rent in the market. On the site, you will be able to compare rental prices for different cars in rental companies to find the one most suitable for you. You can also compare prices for extras like child car seats and even car insurance prices.

Pros of digital currencies

Decentralization

Unlike traditional currencies where the central banks control them, digital currencies have no single entity controlling them. Users have more control over their currencies making transactions faster and efficient.

Security

Through blockchain technology, digital currencies are highly secure and safe from breaches by third parties. This is unlike the traditional currencies where hacking and fraud are often reported.

Anonymity

Digital currencies boast anonymity, a valuable feature for people valuing their privacy. You can make transactions without the sender’s and receiver’s identities being known. 

Lower transaction fees

The transfer of digital currencies attracts lower transaction fees. This is when compared to their traditional counterparts. The main reason is because there are no intermediaries.

Cons of digital currencies 

Volatility

They have high volatility. They are prone to wide fluctuations making them less ideal as a long-term investment.

Limited acceptance

Digital currencies are yet to be wholly accepted. While more businesses with time are embracing them, they are still yet to be widely accepted like their traditional counterparts.

Environmental concerns

Mining digital currencies consume huge amounts of energy. Some reports equate the energy consumed to that used by entire cities and even countries. This raises concerns about the impact of mining them on the environment.

Impact of digital currencies

Digital currencies have had a great impact on our way of life. Below are some of those impacts. 

Made financial institutions change their business models

To adapt to the new reality, digital currencies are forcing financial institutions to rethink their business models. This is because they are losing their position as intermediaries. Without changing their business models they are going to experience reduced revenues. 

Boosted cross-border transactions 

Due to their fast and efficient nature plus security, more people are now preferring them for international transfers. Recipients can receive their money faster regardless of their geographical location, something that can be a challenge when using banks.

Serving the unbanked

It has created an alternative for people who can’t access traditional banking. They can now transact and store money in digital currencies.

Created a level of economic equality

For citizens of countries with unstable currencies, digital currencies have been a welcome relief. They have enabled them to trade freely across the globe with citizens from well-off countries without being at a disadvantage that traditional banking would expose them to.

It has created a new job market

The rise of digital currencies has come with it a new job frontier. The industry has employed exchange supervisors, software engineers, and entrepreneurs who have created trading platforms and in the process created a fortune for themselves. Some traders also trade daily on the platforms and make money out of it.

Increase in the use of e-commerce and mobile financial services

E-commerce has been a big benefactor from the rise and growth of digital currencies. More people who may not have had access to traditional banking systems before can now make digital payments online. In the process, mobile financial services have also benefited as they complete most of these transactions.

Conclusion

For the last decade, the use of digital currencies has been on a steady and upward trend. This has been driven by the demand for the use of decentralized systems and its increased adoption by businesses and individuals. This growth has affected the whole financial ecosystem.  

But with all this revolution, we have also had a casualty in the name of the traditional banking system. The use of blockchain in payments seems to be reducing their revenues. This is because they are losing their role as intermediaries. This has led to some of them changing their models as they try to adapt to this new reality. But all in all, the impact digital currencies have had has been positive. We can only look forward to better things going forward as the crypto economy continues to grow.

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By SARAH