Can Cryptocurrencies Create a New Digital Economy?

Nayib Bukele, President of El Salvador
Nayib Bukele, President of El Salvador
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Cryptocurrencies have been in our lives for a long time. However, it wasn't in our lives until it became popular with the launch of Bitcoin in 2009. First question for crypto beginners how to buy cryptocurrency. So what exactly is Bitcoin and why is it attracting so much attention? Along with many other cryptocurrencies, governments today moved from an unknown form of cash to an alternative they are now considering adopting.

The only challenge keeping cryptocurrencies from growing and being accepted as a viable avenue for meaningful digital transactions is that many see them as an opportunity for financial fraud, such as commissions and other transactions on the dark web. The truth is that in the past many scammers, criminals and terrorists have hid behind the anonymity of cryptocurrencies to carry out their illegal activities.

Bitcoin to help governments

However, the adoption of digital currencies in mass commerce has prompted governments and financial institutions to take measures to curb these crimes. The process of adopting cryptocurrencies against mass trading has not been easy, in fact, many governments still have strong terms.

This is not the case in the small Central American country of El Salvador. El Salvador became the first country in the world to legalize Bitcoin. The law was first proposed by President Nayib Buechele, a former businessman and leader of the right-wing populist party Nuevas Ideas. The so-called “Bitcoin law” passed by the country's legislature in June 2021 will allow the cryptocurrency to be used as the official currency in the Central American country, along with the US dollar.

El Salvador's Bitcoin law will go into effect on September 7, 2021. Additionally, Salvadorans were able to download the government's Chivo digital wallet, enter their personal number and receive $30 in Bitcoin. The government has set up a $150 million fund to convert Bitcoin to US dollars. Recently, El Salvador has added another 150 BTC to their portfolio.

The agency said workers sending money from outside the country could benefit from lower transaction costs and underlined that remittance flows in El Salvador account for 24% of the country's GDP.

According to the Bank for International Settlements (BIS), the average cost of a cross-border remittance at a traditional bank is more than 10%. Just sending money home costs 10% of the wages of workers abroad. By comparison, if Salvadorans sent money home with Strike, a fintech company on top of Bitcoin's Lightning network, their fees would be between 0 and 0,2%, purely network fees, with no fees from Strike. To be able to use the Lightening network, you must have Bitcoin and for this where to buy bitcoin and you need to know how to buy Bitcoin.

Simplifying Operations

The traditional processing method is not easy. It involves difficult and tedious bureaucratic procedures. For example, you must deal with intermediaries such as brokers, agents, legal representatives, and other intermediaries whose role is to ensure that the transaction takes place in accordance with established security standards.

Eliminates middlemen along with Bitcoin, Ethereum and all Blockchain technology. By excluding the middleman, transactions become easier and there are less headaches for the two parties involved trying to find out who is responsible for certain processes.

Evolving Privacy

One of the main reasons people avoid digital transactions is because their personal data can be compromised. Some of the most common ways to compromise this information involve hackers accessing data from online stores. Another aspect of today's transactions is that when you make a transaction such as a wire transfer to pay for an item, the agents involved in the transaction have access to your entire transaction history in the transaction.

Cryptocurrencies solve these two privacy issues quite easily. First off, when you use a cryptocurrency, the exchange is unique and you, the buyer and seller, are the only ones who know its terms. The private digital signature traces the transaction back to its source, while ensuring that your identity is always hidden. Therefore, cryptocurrencies protect you more from identity theft than other digital transaction options.

Reduction of Fees

Traditional financial transactions involve a number of processes. Sometimes a SWIFT payment can be made with several intermediary banks that charge a fee for the service. This sometimes results in very high transaction fees.

Crypto transactions do a great job of keeping these costs down. There, fees are not fixed and depend on network load.

To give an example, in a 2020 transaction by Bitfinex, a cryptocurrency exchange, they placed a payment order of 8 BTC between their addresses, worth over $161.500 billion today. The fee for this transfer was 0.00010019 BTC, or about $5.

Helping all economies and governments, simplifying and streamlining transactions as we know them today are just some of the problems cryptocurrencies can solve. Also an interesting practice is the decentralization of the financial system and the less influence of central banks on inflation and interest rates. But there is still a lot of work to be done to make all this mass viable. Could Bitcoin be the natural currency of the internet? An interesting future awaits us.

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