Cryptocurrency is a digital currency that is created and managed through the use of advanced techniques known as cryptography. It represents a subset of alternative currencies, or specifically, of digital currencies. They were designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. They are generally used to secure online transactions and to control the creation of new coins.
Cryptocurrency made the leap from being an academic concept to (virtual) reality with the creation of Bitcoin in 2009. Bitcoin is the preeminent cryptocurrency and first to be used widely. However, hundreds of crypto currencies exist, and more spring into being every month. The Bitcoin is arguably the world’s first successful decentralized “crypto” currency. It was transferred directly from person to person and free from financial or legal regulation, Bitcoins represent a modern, networked approach to finance. The underlying technical implementation, backed by military-grade key access and cryptography, ensures that transactions are secure and verified.
While it is still too early to estimate the long-term success of internet-based currency systems it is clear that there exists demand for them, especially in scenarios where they might be more cost effective.
Online trading on the other hand is the act of placing buy/sell orders for financial securities and/or currencies with the use of a brokerage’s internet-based proprietary trading platforms. The use of online trading increased dramatically in the mid- to late-’90s with the introduction of affordable high-speed computers and internet connections. Every online trader requires a medium of exchange (currency) to buy/sell or better still transact business and this is where cryptocurrency comes into play as it serves or plays the role of physical money or currency with the exception of it being virtual but it does or perform the same roles. The fact that most online business and trades cannot function without cryptocurrency has made it a must for every online trader hence its impact has changed the face of online trading in a lot of ways. Some of these include:
Advantages over Traditional Money: There are around 30 different types of cryptocurrency in the world today. No two of them are exactly alike, but they all like to advertise certain advantages over the regular bill-and-coin currency you carry in your pocket. We’ll take a look at those here.
First and foremost, digital currencies, like Bitcoin for example, aren’t linked directly to the laws, rules of any government, corporation or bank. The interest rates, fees and surcharges you may have to pay on your bank account or credit card in no way effect your cryptocurrency. As a matter of fact, at the heart of digital currency is a sense of rebellion against these fees, some of which are so deeply buried in fine print as to be considered “hidden.” Along those same lines, the rate of inflation that can potentially diminish the purchasing power of your government-issued legal tender (such as the US dollar) doesn’t touch the value of any alternative currency you hold.
Digital currency affords its users complete anonymity. When you make a purchase with your ATM or credit card, your personal information, your name, physical address and often other identifying data is attached to each and every transaction. Businesses, banks and governments can use this data to track you and take note of your purchases. In contrast, cryptocurrency transactions carry no personal information without your adding it yourself.
Accounts that hold traditional currency can be garnished or frozen completely; the latter means the holder of the account has no access to the funds in it. Since cryptocurrency exists outside the regulations and laws that allow this to happen, it’s very rare for an investor to be rendered unable to access his coins, though in certain situations in which illegal activity is proven to have taken place, it can happen.
Improving Reputation: Digital currencies had a rocky road to travel in the beginning, as drug dealers and money launderers took advantage of the inherent anonymity to make illegal transactions. The fact is, anyfinancial tool can be abused, and cryptocurrencies are now gaining better reputations and a sense of legitimacy with both consumers and vendors hence benefitting online trading.
No Surprise Fees or Waiting Periods. Banks, credit card companies, and online payment services can delay certain transactions or apply surcharges and fees often without their customers knowing, unless they squint to read the fine print. This often winds up being bothersome and costly to both consumers and businesses. Cryptocurrencies carry smaller and more transparent transaction fees, and purchases and transfers can be approved in minutes.
International Use: Using credit cards or bank accounts for international transactions can be problematic; since they’re linked to the legal tender of a specific government, exchange rates, interest rates, and country-to-country transaction fees can bog down the process, and make it a lot more expensive too. Cryptocurrencies aren’t bound to the rules or status of any one government’s currency, so international transactions tend to go a lot more quickly and smoothly when they’re used.
Less Show rooming: showrooming occurs “when a shopper visits a store to check out a product but then purchases the product online from home.” Consumers get the best of both worlds; there’s the in-store ability to physically check out the product, and the online advantage of buying it for less. There’s nothing more frustrating to a business owner than to have a customer browse for an hour or so, and then make their purchase on their smartphone from a competitor often while they’re still in the store! With the use of QR code scanning, and special discounts for customers who use digital currency, merchants can use these tools as a way of cutting down on showrooming. The consumer gets a good deal, and the purchase stays in the store. Again, win-win.
These are some of the ways in which cryptocurrency has influenced and changed the face of online trading as there are a lot more.
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