Why Do People Use Cryptocurrency? A Beginner’s Guide

Why People Use Cryptocurrency
Why People Use Cryptocurrency

Cryptocurrencies are decentralized digital assets that leverage blockchain technology to gain transparency, security, and independence from traditional financial institutions.

Bitcoin, the first and most well-known cryptocurrency, paved the way for this new form of digital money. But before delving into why people are drawn to cryptocurrencies, it’s essential to grasp their foundational principles.

To properly understand cryptocurrency, in terms of Bitcoin and all of the altcoins that followed it into the market, it is essential to understand the motivations behind the movement.

If the beliefs that spawned cryptocurrency align with yours, you might want to adopt it into your own life. And if nothing else, you’ll have a clearer picture of what it’s all about in case you like to invest in it somewhere down the road. Let’s delve deeper into Bitcoin and its origins.

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The Ideas Behind Cryptocurrency

The Ideas Behind Cryptocurrency
The Ideas Behind Cryptocurrency

The cryptocurrency movement was a reaction against the fact that the finances of individuals often slip out of their hands. This isn’t to say that people have no control over their money and how it is spent.

But, indeed, you often need large, third-party companies to complete transactions with that money, hold it for safekeeping, and be a kind of facilitator for any move you might want to make.

This kind of thing has frustrated many people with independent views for quite a long time. It’s that kind of frustration that makes people refuse banks and hide all their cash away somewhere only they can find it or invest in gold that they hold onto themselves. Those ideas are extreme, however, and it is difficult to participate in society if you hold them.

At some point, a group of developers wanted to sidestep the banks, credit card companies, and every other financial institution with the ability to get their hands on the finances of everyday people.

But they had to devise a way for people to pass money from peer to peer without having to be in the same room. And if not in the same room, how would these people then be able to rely on this proposed transaction being carried out in any verifiable way?

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The Bitcoin Solution

The Bitcoin Solution
The Bitcoin Solution

It was first conceived in 2009 by a group of developers trying to devise a solution for that trust problem. Blockchain technology proved to be the solution; it was the key to the invention of Bitcoin, which would start the cryptocurrency revolution.

These blocks are added by a network of computers attempting to solve a coding problem. The first of these to solve the problem is the one that verifies the block and provides the trust factor; this so-called “miner” is also presented with digital coins as a reward for their success.

This currency, which the developers termed Bitcoin, became the first cryptocurrency. And the miners were the answer to the problem of verification and trust. Hence a new kind of money was born; but it would need some people to use it before it could be anything more than a theoretical exercise.

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Reasons Why People Use Bitcoin

Reasons Why People Welcomed Bitcoin
Reasons Why People Welcomed Bitcoin

For the most part, Bitcoin was the only game in town in the early days of cryptocurrency. Yet it wasn’t long before it became a well-known name in technological and financial circles.

The most obvious reasons for its growth are the same reasons it captivates people today. This is one of the reasons why people use Cryptocurrency.

1. Speed

Speed
Speed

A Bitcoin transaction generally has little wait time for it to be processed. Once verified on the blockchain, the coins will show up in the receiver’s digital wallet in hardly any time.

This stands in stark contrast to, for example, a credit card transaction, which can take days, especially if it is begun on the weekend, to be ultimately settled.

2. Reduced Fees

No Fees
Fewer Fees

One of the advantages that drew early adopters to Bitcoin was the potential for reduced transaction costs compared to traditional banking systems.

While it’s true that Bitcoin can sometimes offer fee-less transactions, it’s not always the case. The fee structure is dynamic and can vary based on network demand. During times of high traffic, fees can increase.

However, even with these fluctuations, many find the fee structure of Bitcoin to be more transparent and, in some cases, more affordable than traditional banking and financial systems.

3. Security

Security
Security

One of the most unfortunate aspects of the digital age has been the ease with which hackers and other computer experts can steal personal information. It often requires them just to get a credit or debit card number.

Worse yet, if you use a credit or debit card to buy from a vendor and that vendor is hacked, your financial and personal data could go to the hacker.

People who started using Bitcoin realized that none of this was a concern. Only the amount of coins that need to change hands is proffered in a Bitcoin transaction. The rest can be kept safely in a digital wallet with offline storage.

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4. Universality

Universality
Universality

For those people looking to bring the far corners of the world much closer to them, cryptocurrency was just the ticket. Many parts of the globe that don’t have access to a bank have access to an internet connection.

Those people could trade coins with others from across the world without worrying about obstacles like tariffs or borders.

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The Lure of the Cryptocurrency Movement

The Lure of the Cryptocurrency Movement
The Lure of the Cryptocurrency Movement

The people who use cryptocurrency, whether as a payment system or for some other daily purpose, can take their autonomy into their own hands. They don’t need to be reliant on corporations or big businesses at every minute of every day.

As a result, cryptocurrency, both at the beginning of its existence and now nearly a decade into it, tends to appeal to those with an independent spirit about it.

Many people have no use for the feeling that they are just a tiny part of some big machine over which they have no control. Cryptocurrency, especially the coins created for the right reasons and with the right ingenuity behind them, gives them back that control.

Now that cryptocurrency has evolved and survived some growing pains, the next step is to ensure that the applications that the coins promise will be used on a widespread level.

For that to happen, it might mean that the cryptocurrency community will need to come into alliance with some of the powers that be that they have previously tried to evade. It will be interesting when that happens to see if cryptocurrency loses some of the essence that made it so famous in the first place.

In any case, the rise of cryptocurrency should continue. And as more people get exposed to the coins, they will find more reasons for using cryptocurrency.

FAQs

What is blockchain technology, and how is it related to cryptocurrency?

Blockchain is a decentralized and distributed ledger system where transactions are recorded across multiple computers to ensure the data is secure, transparent, and immutable.

It’s the underlying technology for most cryptocurrencies, ensuring transactions are transparent and verifiable without central authority.

Are all cryptocurrencies the same as Bitcoin?

No, while Bitcoin was the first cryptocurrency and remains the most well-known, thousands of cryptocurrencies are often referred to as “altcoins” (alternative coins).

Each has its unique features, purposes, and underlying technologies.

How do I store and secure my cryptocurrency?

Cryptocurrencies are stored in digital wallets. These can be hardware-based (like a USB device) or software-based (like apps or desktop programs).

It’s crucial to keep your cryptocurrency wallet secure using strong passwords, two-factor authentication, and keeping backup keys in a safe location.

What determines the value of a cryptocurrency?

Multiple factors influence cryptocurrency value, including supply and demand dynamics, technological developments, regulatory news, market manipulation, and broader economic factors.

Can I use cryptocurrency for everyday transactions?

As adoption increases, more businesses and services accept cryptocurrency as payment. However, checking the transaction fees and confirmation times is essential, especially during peak network congestion.

How do I convert my cryptocurrency back into traditional currency?

Most cryptocurrencies on cryptocurrency exchanges can be traded for traditional (fiat) currencies. Once traded, the fiat currency can often be withdrawn to conventional bank accounts.

Is cryptocurrency anonymous?

While cryptocurrency transactions are transparent on the blockchain, they don’t directly show personal information. However, they aren’t entirely anonymous; they are pseudonymous. If someone can link your identity to a cryptocurrency address, they can track your transactions.

What are the risks associated with investing in or using cryptocurrency?

Cryptocurrencies are known for their volatility, meaning their value can significantly fluctuate within short periods. There’s also the risk of loss due to hacking, loss of wallet access, regulatory crackdowns, and broader market dynamics.

How does the New Zealand government and regulators view cryptocurrency?

In New Zealand, cryptocurrencies are not considered legal tender but are viewed as a form of property. This means that they are subject to specific tax implications.

The Financial Markets Authority (FMA) has provided guidelines on how cryptocurrency should be treated regarding initial coin offerings (ICOs) and services related to cryptocurrencies like exchanges and wallets.

New Zealand is generally open to digital innovations. Still, anyone dealing with cryptocurrencies should be aware of and comply with local regulations, ensuring they meet anti-money laundering and countering the financing of terrorism (AML/CFT) requirements.

Mamta Sharma

Mamta is a spirited writer hailing from Wellington, bringing a youthful zest to the world of digital content. Merging her love for narrative with an eye for detail, Ella crafts stories that resonate and engage the modern reader.