Decentralised Future: Crypto Trends | 2021

Decentralised Future: Crypto Trends | 2021

Introduction

Money makes the world go round but what if money could change shape and size?

Money has been one of the most significant inventions in human history. With evolving uses of money, its form has also changed over time from barter system to crypto currency.

The story started with the barter system where people exchanged goods and services directly with each other. However, owing to no common measure of value, people moved on to commodity money like gold and silver coins. Then came fiat money or currency notes. These did not have any intrinsic value as such but we’re backed by the law i.e.. government authority or the central bank. Fiat money was more convenient, efficient and easily transferable. But fiat money was not without its drawbacks.

To overcome these disadvantages, came digital money like the Unified Payments Interface (UPI) in India allowing for instant and secure transactions around the world through a mobile and internet. Compared to fiat money, digital money was more secure, efficient and transparent.

People now found it easier to store them on their phone without the fear of their money being lost or stolen. Digital money also enabled inclusion of many people who were previously not connected with banks but at the same time digital money was not perfect. Some challenges that digital money brought with it were the need for intermediaries like banks or payment platforms, the lack of privacy and the increased exposure to cyber attacks or technical glitches.

Who is the new player?

Then came the latest hero of the story, cryptocurrencies such as Bitcoin, Ethereum or Dodgecoin which is based on blockchain technology which is like a distributor ledger that records and verifies transactions without even having the need for a central authority or intermediaries making the transactions more transparent and private.

Crypto currencies come with many benefits. They have no or very low exchange rates and they can be transferred around the world without the intermediaries or any fees. Crypto currencies are the easiest to use and can be used by anyone, anywhere, anytime with just a click on the phone. Moreover, the platform is always accessible with high security, privacy and anonymity. The crypto currency algorithms are encrypted and ensure that no personal or financial information is disclosed or stored in any transaction.

What is the history and the evolution of cryptocurrencies?

Though the history of cryptocurrencies is very short, it is a fascinating one! The first crypto currency, Bitcoin, was made in 2009 as an alternative to the traditional monetary system. Bitcoin ensured that the power and control was not concentrated in the hands of a few people. The Bitcoin algorithm secures the transactional network and validates the transaction.

The advent of Bitcoin, sparked a transformation in the financial market. From a few cents to thousands of dollars people started investing in the potential of blocks in technology and the concept of decentralization Bitcoin as a concept also lead to revolutions in different countries that started working for their own cryptocurrencies in this face Bitcoin all the faced various challenges like legal disputes technical issues security beaches market world reality and most importantly regularity and certility the price of Bitcoin crash and fluctuated lot of times specially in 2018 where Bitcoin lost more than 80% of its value in just a few months. In the similar line for in the model of Bitcoin came Ethereum that introduced smart contracts and programmable agreements that would execute automatically on the blockchain it also enabled the development of various applications and platforms. Cryptocurrencies have become a global phenomena with attention to the involvement of various celebrities, influences and philanthropists like Elon Musk, Mark Cuban, and Jack Dorsey who have either invested, endorsed or donated to crypto. Cryptocurrencies are also gaining acceptance among people, businesses and governments. El Salvador became the first country to make Bitcoin a legal tender in 2021.

Coming to the other side of the same coin, Bitcoins face various risks because they are not controlled by any government and are subject to the whims and fancies of the market and can be easily influenced by external factors such as news events or rumors and they can extreme and they can experience high or extreme fluctuation in price and have no consumer protection because people have no recourse or guarantee when it comes to issues like theft loss or fraud. Moreover, the transactions that you do using crypto are irreversible and cannot be modified or canceled. Any small error on your part may result in permanent loss of your money. A very important point with respect to Bitcoin mining is that it consumes so much electricity and generates a lot of carbon emissions contributing to global warming in climate change which are the burning questions of the 21st century. To overcome these challenges, different governments have taken policy changes such as banning, restricting or taxing crypto activities or even creating their own digital currency like digital yuan in China or the digital rupee in India. However, these policy changes have also resulted in uncertainty and confusion for crypto developers and investors which has in turn affected the growth and development of the whole crypto currency.

What is Decentralised Finance?

A very new and promising sector in the field of cryptocurrencies is the area of decentralised finance or DeFi which refers to the use of blockchain technology and smart contracts to offer different financial products and services like lending, borrowing, investing and saving of money without the need for various intermediaries. Decentralised finance is a step in democratising the financial sector through inclusivity and transparency.<br><br>

With increased popularity, DeFi is being used in e-wallets, stable coins, yield harvesting, non-fungible tokens (NFTs) and even flash loans. These new and innovative avenues offer high returns and benefits but also involve high risks and drawbacks.

What is the future of cryptocurrencies?

Cryptocurrencies have opened many opportunities and horizons in the field of economy and finance. But their potential still remains to be harnessed judiciously. Cryptocurrencies have been embraced by people as they are a valuable asset that can easily be transferred across borders and are a form of digital innovation enabling people to embrace their digital and financial freedom in a democratic ecosystem. However, certain issues like volatility, privacy and regulation remain unaddressed. Crypto is however, not a Pandora’s box nor is it a panacea. It’s more than just digital money and its future heavily depends on its usage.
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