2017 was the year the Bitcoin surge saw the cryptocurrency move from $800 to $17,000.
Despite dire warnings of a dangerous bubble, acolytes predict a bright future for Bitcoin and its competitors Litecoin and Ethereum.
No investment is without risk, but here are five advantages cryptocurrencies have over their regular cousins.
Inflation
In many economies, stagnating wages and rising inflation mean people’s money is effectively worth less than it used to.
But cryptocurrencies could curb inflation if used as a global reserve currency because units like Bitcoin are minted at decreasing fixed rates every few years — creating modest deflation until all of the strictly limited 21 million coins are eventually minted.
This deflation would generate some breathing space when consumers benefit from more value from their earnings.
Transparency
A currency like bitcoin isn’t subject to centralised regulation, but it might still be governed more transparently than regular currencies.
Currency distribution and management rules are agreed by consensus by owners themselves — and rules can’t change unless the majority of investors agree to run a new version of the protocol.
Some people might argue that this is more democratic than a central bank and political elites whom make major decisions that are completely without citizens’ control.
Security
Private individuals looking to protect assets and companies seeking to maximise profits have traditionally relied on the discretion and privacy of offshore bank accounts.
But provided that stringent cybersecurity is embedded, cryptocurrency might be just as secure.
Since there’s no central regulator, cryptocurrency wallets don’t fall under the jurisdiction of any territory — so they can’t be blocked or frozen by authorities.
Critics point out that cryptocurrencies are already used in criminal transactions on the dark web, so this level of security might make it harder to police.
But there are legitimate reasons individuals may need high levels of security — for example, as a back-up against fraudulent lawsuits.
Transaction fees
Cryptocurrencies do carry transaction fees — but overall they compare favourably with those associated with credit cards and Automated Clearing Houses (ACH).
Bitcoin transaction fees are lower than check and wire transfer charges and are competitive with ACH costs for larger amounts of currency.
But Ethereum is the cheapest and quickest way to send money — costing only $0.01, with confirmation received in under two minutes.
No borders
Cryptocurrency may also become the most efficient way of doing business across borders.
And larger organisations are starting to invest in cross-border digital currency payments — IBM recently announced it had settled international transactions using a new currency developed by blockchain startup firm Stellar.
British digital payments firm Revolut, backed by Lloyds and Mastercard, also recently permitted its 11 million customers to use Bitcoin to transfer cash across borders.
With established companies slowly testing the water, cryptocurrencies might gradually move into the mainstream of financial services.
These five advantages of cryptocurrencies suggest that they may overtake regular currencies as the preferred means of moving money worldwide.
Have you invested in cryptocurrencies? Share your advice in the comments section.
