Do you remember ten years back when you thought that cryptocurrency would replace money? You were a unicorn ten years ago. The soaring prices of cryptocurrencies like Ethereum and Bitcoin in the Covid-19 pandemic have rekindled interest among many. Bitcoin is not yet a replacement for existing currencies. The central banks enquired about cryptocurrencies due to the rise of “stable coins” and “cryptocurrencies”.
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Can Cryptocurrency replace money?
What is Bitcoin?
Basics
Bitcoin can be described as a virtual currency or decentralized cryptocurrency. It is the peer-to-peer version of electronic money. This allows for the sending of payments online directly from one party (or person) to another. This is done without the need for any financial institution to be involved or permission.
The Procedure
Once you have a Bitcoin, an address or a password that contains the cryptocurrency is automatically yours. By generating a transaction, you can send the cryptocurrency from one account to another. This transaction is documented in an immutable, public block. These blocks are connected to form a blockchain. This is a public record that contains all historical Bitcoin transactions.
What is mining
Every 10 minutes, the networkuser who receives a new Bitcoin reward will create these blocks. A computer system randomly guesses the same number repeatedly. The system will award the new bitcoin to the user who guesses this number closest. This is called mining. Mining rewards tend to decrease over time.
What Are Stablecoins?
A cryptocurrency whose market value is tied to another asset pool. Stable coins are characterized by a stable exchange rate. This means that the price of a cryptocurrency is not allowed to fluctuate. Tether, the most common stable coin is pegged by the Tether Corporation at a 1:1 ratio to the US Dollar.
Why do people use Tether rather than the US Dollar?
Transactions of cryptocurrency in traditional currency, especially in large amounts, can incur hefty costs. Crypto traders can avoid these costs by using Tethers in place of US dollars. Tether Corporation has always been avoided by most financial institutions because it could be used to facilitate money laundering. The state of New York is currently investigating the corporation.
Can Cryptocurrency replace money?
It is easy to see that these stable coins and cryptocurrencies can replace traditional currencies. There is some uncertainty as to whether digital currency can replace money. These digital currencies are viewed with skepticism by some countries and financial institutions due to their independence, which is not regulated by any third-party authority. Some people are also concerned that cryptocurrencies could be used to promote money laundering or other financial crimes. We can, however, solve the puzzle of uncertainty surrounding a digital currency that replaces money by ensuring systems check and monitor transactions.
Can Cryptocurrency replace the Dollar?
Why it Can’t Replace the Dollar
No, it’s not possible! The two currencies have distinct differences. US dollar is a traditional currency while the other(cryptocurrency; Bitcoin and stable coin) is a tech-based currency. The one is made of paper while the other consists of bits. One is a tangible object, while the other one is not.
The FED controls the US dollar and is supported by the Government. It’s easy for the banks to track money trails. The government, the financial sector, law enforcement agencies and intelligence agencies all work together to detect and monitor illegal transactions.
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