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Bitcoin can improve global financial infrastructure

9th January 2024

Cryptocurrencies have taken the financial world by storm in recent years. Their rise in popularity has sparked heated discussions about their true usefulness. Indeed, what are cryptocurrencies really used for? Can they really improve traditional finance as many proponents imply?

Does their role go beyond simple speculative investments?

In this article, we will explore the different facets of cryptocurrencies in depth. We will seek to determine whether these digital currencies are truly revolutionary or simply a passing trend in the financial world.

The advantages of cryptocurrencies over fiat currencies

Cryptocurrencies are digital assets that use blockchain technology to secure and record their transactions. They offer a number of advantages over traditional currencies. This is the case for more secure and transparent transactions, a reduction in transaction fees and global accessibility.

A monetary system with secure and transparent transactions

The blockchain represents a distributed ledger, immutable and transparent, which guarantees the authenticity and integrity of transactions.

Cryptocurrency transactions are therefore much more secure than fiat currency transactions, which are vulnerable to fraud and hacking.

In addition, cryptographic operations are transparent, that is, they can be viewed by anyone. This helps fight corruption and illegal activities.

A reduction in transaction fees

Cryptocurrency transactions are generally much cheaper than fiat currency transactions. This is because cryptocurrencies do not use trusted third parties, such as banks or financial institutions, to process transactions.

Cryptocurrencies have the potential to reduce international transaction costs. Cryptocurrency transactions can be carried out directly between two parties, without the intervention of a third party institution. This helps reduce transaction fees.

According to a World Bank study, transaction fees for international money transfers average 7%. Cryptocurrencies can reduce these fees to around 2%.

This reduction in transaction costs could have a positive impact on international trade and investment. It could make it easier for small businesses and individuals to export their products and services to other countries.

Global accessibility

Bitcoin and altcoins are available to everyone, regardless of your geographic location. This is explained by the fact that the world of cryptos is not subject to the same restrictions as that of currencies.

People who do not have access to traditional financial services can therefore use cryptocurrencies to carry out financial transactions.

Concretely, how are cryptocurrencies used?

Cryptocurrencies have many practical uses beyond simple payment. They offer a new financial paradigm, more decentralized and accessible to all.

For investment and speculation

Even if there is a difference between trading and investing in cryptocurrencies, overall, it is a question of considering them as speculative assets. Cryptocurrencies are also used for speculation, that is, buying and selling assets in the hope of making a short-term profit.

In fact, investing and speculation are among the most common uses of crypto. The value of cryptoassets is very volatile, making them attractive to investors seeking high returns. Cryptocurrencies can also be used to finance startups as part ofInitial Coin Offerings (ICO), For example. The uses in finance are in fact very numerous, including derivative products such as ETFs, among others.

Make payments for commerce

Cryptocurrencies also facilitate international payments. Transactions are fast and inexpensive, making them attractive to people who want to send money abroad.

They can also be used to circumvent financial restrictions imposed by governments. For example, people living in countries with limited access to financial services can use cryptocurrencies to make transactions.

Here are some concrete examples of practical uses of cryptocurrencies in commerce:

Application in smart contracts and blockchain

Smart contracts (called “smart contracts” ) are digital contracts that are automatically executed when certain conditions are met. Blockchain is the technology underlying cryptocurrencies, which allows data to be stored and secured in a distributed manner.

Cryptocurrencies can be used to power smart contracts, providing a way to pay for transactions and guarantee their execution. They can also be used to create private blockchains, which can be used for specific applications. This is the case for supply chain management or digital identity management, for example.

Financial inclusion for unbanked populations

One of the biggest global financial problems is financial exclusion. According to the World Bank, around three-quarters of people worldwide do not have access to bank accounts, credit cards or loans.

There are a range of solutions that cryptocurrencies can bring to global financial problems. However, they can be divided into three specific areas, namely:

  • Financial inclusion for unbanked populations;
  • Circumvention of financial censorship and capital controls;
  • The potential for reducing international transaction costs.

Cryptocurrencies have the potential to solve this problem by providing an accessible and affordable financial solution to this category of people. In fact, they can be stored and used without the need for a bank account or credit card. They are also relatively inexpensive to use, making them affordable for low-income people.

Moreover, initiatives aimed at promoting financial inclusion through cryptocurrencies are already underway in many countries. For example, the government of Nigeria launched new stablecoin cNGN, which is a national digital cryptocurrency. This initiative aims to provide access to financial services to people who do not have access to banks.

Circumventing financial censorship and capital controls

Cryptocurrencies can also be an alternative to circumvent financial censorship and capital controls. Since blockchain technology is decentralized, it is not controlled by any central authority. This makes cryptocurrencies difficult to block or confiscate by governments.

This characteristic of cryptocurrencies makes them attractive to people who live in countries where financial freedoms are restricted. They allow money to be transferred securely and privately, even if governments block traditional money transfers.

Conclusion

While some see cryptocurrencies as an alternative to the traditional financial system, others see them as a new extension which makes it possible to improve the current financial framework.

It is clear that these digital currencies have already had a considerable impact, but their true potential has yet to be fully defined.

Overall, it is essential to continue to carefully study and evaluate the implications of cryptocurrencies and bitcoin in societies. In the years to come, they will undoubtedly play an even more important and disruptive role in the global financial landscape.

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Moctar Bouraima

I am passionate about what Bitcoin can bring in terms of financial emancipation and it is with great joy that I share my articles on the subject; Whether it's blockchain, web 3, DeFi, because I know that it helps in one way or another to move the ecosystem forward.

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