Blog: Cryptocurrencies are revolutionizing the world
Cryptocurrencies will change the world more than many can imagine. Understanding the potential of cryptocurrencies and increasing their use will inevitably lead to a situation where many of the problems and challenges familiar today will be history in the future. This paper introduces how cryptocurrencies are revolutionizing the world and explain how this is possible in practice.
The leading cryptocurrencies behind the change
There are several thousand different cryptocurrencies in the cryptocurrency market today. Regardless of many cryptocurrencies, it can be said that the most significant social impacts will culminate in Bitcoin and Ethereum. For this reason, it is good to go through the activities of these two giants of the cryptocurrency world in a little more detail. After presenting the workings of Bitcoin and Ethereum, it is time to consider how cryptocurrencies, led by Bitcoin and Ethereum, are changing the world.
Bitcoin is the world's oldest and best-known cryptocurrency in fully digital form based on blockchain technology. The maximum number of bitcoins is 21 million, and, unlike traditional currencies, it is impossible to create bitcoins indefinitely. New bitcoins are created in the world in a process called mining. In addition to creating new bitcoins, mining also includes confirming transactions in the blockchain.
Bitcoins can be transferred anywhere in the world without third parties such as banks and payment intermediaries. This means that bitcoins typically move from one address to another very quickly and at a low cost.
Unlike traditional currencies such as the Euro and the Dollar, Bitcoin is not managed by any single entity. As a result, it is completely impossible for an individual, such as a central bank, to control bitcoin's operation.
Bitcoin's popularity among investors has been growing strongly in recent years. The explosive growth of Bitcoin's popularity can be seen in the background of, for example, the reckless monetary policyy of central banks and the predictability of bitcoin, which is reflected, for instance, in the maximum number of bitcoins locked in. Bitcoin's unique features allow Bitcoin to offer an excellent alternative to both traditional investments such as gold and equities as well as traditional currencies (e.g., euro and dollar).
DeFi and Ethereum
In addition to Bitcoin, there are numerous other cryptocurrencies that can have a revolutionary impact on people's daily lives. Of these, the vastly most comprehensive platform solution in the world of cryptocurrencies, called Ethereum, and the strongly linked decentralized economy entity, also known as DeFi (Decentralized Finance), stand out. Before introducing DeFi, it's a good idea to go through a bit of Ethereum's operating principles, as well as the differences between Ethereum and Bitcoin.
Ethereum's operations began in the summer of 2015, and today Ethereum can rightly be said to be one of the world's most significant and popular cryptocurrencies. In addition to decentralized economy applications (DeFi), Ethereum also enables the programming of various smart contracts and distributed applications (dApp). Applications built on top of Ethereum often make various third parties, such as banks, redundant. Ethereum enables applications to operate without third parties, as its blockchain is fully decentralized and not under the control of any single party. Most of the cryptocurrencies that have entered the market in recent years have also been built on the top of Ethereum.
Ethereum has a completely different operating principle compared to bitcoin. Bitcoin can be seen above all as a digital payment system and a medium of exchange. Ethereum, on the other hand, is a platform with a distributed blockchain on which it is possible to program almost anything. A good example of applications programmed on top of Ethereum is the numerous DeFi applications that will shake our understanding of banking services.
DeFi is currently growing swiftly and enabling people worldwide to provide services almost entirely similar to traditional banks. DeFi enables a fully open market that works more efficiently than the conventional banking system. Thanks to DeFi services, people who previously did not have access to traditional banking services can now enjoy similar benefits than Western people. Various DeFi services have recently gained tremendous popularity among investors as well. At present, traditional banks do not pay interest on deposits in practice, so the multi-percent annual interest rate offered in DeFi services naturally seems very attractive to investors.
Problems solved by cryptocurrencies
Cryptocurrencies like Bitcoin and Ethereum will provide a solution to several significant challenges facing mankind. Many of these problems may be foreign to us Westerners, but they are quite commonplace in many countries of the world.
1. Starting a business
The availability of banking services is essential in conducting business. Banks make it possible for companies to accept payments and send money around the world. However, many people in the world today are not yet covered by banking services, so doing business is also very difficult. With cryptocurrencies, people can manage their wealth and access services similar to banking services from applications built on distributed blockchains. Thanks to cryptocurrencies, the lack of a bank account is no longer an obstacle to starting a business anywhere in the world.
2. Economic freedom
Distributed cryptocurrencies such as Bitcoin allow people complete financial freedom. Bitcoin's blockchain is fully decentralized, so no one can influence its operations with its own actions. Thanks to Bitcoin, people no longer need third parties to manage their wealth, and the value of wealth does not depend on the monetary policy decisions made by central banks. People can accumulate, manage and send their wealth in the way they want.
3. Protection of property rights
Numerous people around the globe have in the past not been able to preserve their wealth safely without fear of being robbed. Many of the world's poorest countries are very unstable, and the risk of being looted is high. As a result, preserving wealth in physical form is very risky. With cryptocurrencies, people who have not previously been able to save to improve their living standards can now save without fear of being robbed. Saving is essential for people to be able to improve their standard of living in the future.
4. Money transfers
Cryptocurrencies revolutionize the way people send money to each other. Cryptocurrencies led by bitcoin allow people to send and store value without a bank account. Thanks to Bitcoin, people have the opportunity to manage their own wealth in digital form for the first time. In addition, due to the absence of third parties, money also moves to its destination much faster than in traditional systems.
Only the average 10% of the adult population in the world's poorest countries has their own bank account, so the ability to store and send wealth without a bank account is revolutionary, especially for people living in those countries. Numerous people on earth live almost entirely on remittances sent by relatives working abroad. In the absence of a bank account, remittances are handled by large multinational companies such as Western Union. However, using remittance companies is very expensive and can take a significant slice of the wealth transfer. Thanks to cryptocurrencies, money transfers take place almost in the blink of an eye and at the lowest cost. Thanks to their low cost, cryptocurrencies make it possible for people. These, often very poor people are recipients of remittances, to have significantly more money left in their hands than before. This, of course, has a positive effect on the living standards of these people and the fulfillment of the basic conditions of life.
5. Human rights
According to the UN Declaration of Human Rights, everyone in the world should have the right to own property. However, this right may not always be exercised, as, in many countries of the world, banking services and property rights may be prohibited for some groups of people.
Bitcoin and other cryptocurrencies are revolutionizing the lives of the most vulnerable people. No one can anymore madly restrict people's right to property or people's access to their wealth. Bitcoin and its ever-growing infrastructure also have an unprecedented impact on the way humanitarian aid is distributed. Organizations no longer have to rely on corrupt rulers, as it is possible to give help directly to those who need it most.
6. Economic inequality
Cryptocurrencies, particularly the various decentralized economy applications (DeFi) built on top of Ethereum, are also contributing to reducing economic inequality. DeFi is a fully decentralized entity, and the DeFi services can be used anywhere in the world. DeFi makes services familiar from traditional banks also available to people who in the past could only dream of the services provided by banks, such as raising a loan or accruing interest. In addition, DeFi is also much more efficient than traditional banking services, so Western countries have also begun to awaken to its revolutionary potential. Why keep your money at zero interest in a bank account when at the same time it is possible to get up to several tens of percent interest income from different DeFi services?
In many emerging countries, opening a bank account is far more challenging for women than for men. The lack of a bank account already often weakens women who are very much weaker position than men. According to research, the lack of a bank account is often an obstacle to starting a small business. In emerging countries, small business is the only way to raise living standards. In the absence of a bank account, improving living standards and tackling inequality is extremely difficult.
Cryptocurrencies make it possible for anyone, regardless of gender, to start accumulating and managing their wealth. This will have a significant impact, in particular, on improving equality between men and women and raising women's living standards.
Cryptocurrencies and the blockchain technology enable several things that were not previously believed to be possible. Cryptocurrencies like Bitcoin and Ethereum, in particular, have already positively impacted the lives of millions of people . In the future, as awareness and use increase, the opportunities offered by cryptocurrencies will be massive. People's way of managing their wealth is changing, numerous people in the world can rise out of poverty, and equality between men and women is improving. The examples presented in the paper are just a scratch on the surface of how cryptocurrencies will revolutionize the world in the future.Mikko Soon Cryptocurrency specialist