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Reasons why cryptocurrencies exist and why they are different from fiat (paper) currency

By dotunk • A year ago • 8329 • 1200
Reasons why cryptocurrencies exist and why they are different from fiat (paper) currency

These are the reasons why cryptocurrencies exist and how they are different from the normal paper money you and i carry around.


Decentralized

Not controlled by a central bank and so not prone to corruption and manipulation. It is open sourced and transparent. No single institution controls it. It is run by an open network of dedicated computers spread around the world.


Limited supply

The supply is tightly controlled unlike fiat currency. Because its supply is limited, the price can only go up because according to the laws or demand and supply, when supply is low, price goes up. In Bitcoin for example, the maximum amount of Bitcoin that can ever be released into circulation is 21,000,000 bitcoins which means it is a scarce resource. When all 21million coins are mind and there are no more, demand goes up so does the price. So it makes sense to accumulate it now.

Divisibility

Cryptocurrencies are usually divisible into several tiny bits. For example, 1Bitcoin is composed of one hundred million satoshi – 100,000,000 = 1 Bitcoin. So in essence, you don’t have to buy the whole bitcoin all at once except of course if you can.

Pseudonymity

Cryptocurrencies are anonymous currencies because you can send and receive money without giving any personal identifying information like traditional banks. Your pseudonym is the wallet address with which you receive the coins. Every transaction is stored in the blockchain system so it can be tracked.

Immutability

Transactions cannot be reversed. Once you send the money it is sent. No one can reverse it. So when sending money, you should verify everything before clicking the send button.

Portability

This means you can go around with tens of millions without anyone knowing. Imagine going around with a million naira, everyone will know you are carrying something – and you are at risk.




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