Why is cryptocurrency becoming more and more important? What is its value?

Dec 02,2022
Why is cryptocurrency becoming more and more important? What is its value?

In recent years, virtual currency emerged out of thin air and quietly became a financial product. There is no public opinion on data cryptocurrency. Most of our countries define virtual currency as illegal financial goods, or even illegal financing. They do not protect relevant transactions, but rather regard digital cryptocurrency as a "money laundering" method. There are many reasons for the high pressure on data cryptocurrency. So why is cryptocurrency becoming more and more important? What value does it have? Next, let's have a look.

Why is cryptocurrency becoming more and more important?

1. Cryptocurrency is owned by everyone

Cryptocurrency is similar to any traditional national currency, but with some basic differences.

The current "fiat currency" is created and regulated by government departments, and today all these represent liabilities. Anyone who owns a national currency has a "IOU" issued by the country.

Cryptocurrencies do not represent liabilities. It strictly represents itself, and its value is determined by what someone is willing to trade with it.

The fact that cryptocurrency is decentralized plays an important role in determining its currency value.

No one owns or controls a cryptocurrency. Its value is not limited by a country's political intentions or the central bank's fiscal policy.

Note: Some people may think that the lack of centralization of cryptocurrency is a tax saving method. However, like stocks and bonds, cryptocurrencies are called property. In the United States, he is subject to capital gains tax on sales or swaps.

The loan currency operated on the centralized account book (representing the transaction records managed by a single entity like the national central bank) will be subject to artificial control and corruption. According to decentralization, cryptocurrencies operate on "distributed ledgers" or shared transaction details. This type of account book is the key to cryptocurrency, and leads us to the next reason why cryptocurrency is important.

2. Cryptocurrency can hardly be forged

Cryptocurrency operates on the blockchain, which is the distributed ledger we mentioned above. Mastering blockchain applications will also help you to understand not only why cryptocurrency is, but also why it is the key to the power of virtual currency.

Blocks are composed of large blocks of encrypted data. Blockchain is a public database in which blocks are stored and related to each other in order.

Each block in the blockchain has a specific code that distinguishes itself from all other existing blocks. Such unique codes are called hash values. The information blocks imported into the blockchain are added in chronological order. A new block is added directly after the last block, and it has a different hash value.

3. Cryptocurrency transactions (mostly) are confidential

For the traditional loan currency issued by the government, you can privately use cash in kind to conduct transactions or pay in person.

Paper, metal, cloth and plastic loan notes account for only a small part of the total circulation of most legal tender. A large amount of cash in kind will soon be identified and checked by the government, financial system regulators and other central institutions.

Note: It is a good thing to supervise a large number of cash transactions. It maintains the legitimacy of money and prevents criminal companies such as money laundering.

Cryptocurrency is different. It depends on well-designed mathematics to track communication between two people or companies. This is mainly done anonymously. Although the ledger or transaction details can be publicly queried in a wide range, the parties exchanging cryptocurrencies are more private. By definition, cryptocurrency must exist in the digital wallet electronically. The owner is the holder of the wallet's personal key. Credit currency is exchanged from most secret name wallets owned by users.

Note: Although the purpose of cryptocurrency is anonymity, it is not difficult to find the identity of the wallet owner with advanced forensic technology. Some cryptocurrency projects, such as Monero, are designed to resist identity discovery.

A few enterprises provide physical coins forged with cryptocurrency addresses and verifiable values stored on the blockchain. This is an exciting concept for enthusiasts, collectors, and even gifts. This brings a little bit of data cryptocurrency into reality.

4. Cryptocurrency security grows over time and value

Earlier, it was mentioned that hacking or control will require a lot of energy and money, so that it will basically become a useless effort. In detail, hackers need to control more than 50 percent of the computers that make up the "consensus" network.

The consensus network is just a computer connected to the blockchain or distributed ledger cluster. For more sophisticated cryptocurrencies such as BTC or Ethereum, the cryptocurrency network is so large that most hacker actions are impossible.

In the early days of cryptocurrency, because the cryptocurrency network itself was much smaller, it was easier to gain most control.

This is an important fact to remember for investors or users who have not yet developed a relatively large network of new cryptocurrencies. The lower the network, the more vulnerable it is to hackers.

What is the value of cryptocurrency?

1. The medium of currency circulation among countries

The encrypted digital assets finally play the role of "international Internet of Things, inter trade settlement and foreign exchange settlement". The reason why it is remarkable is that it is creating a global rapid circulation. The more circulation fields, the wider the scope, and the greater the practical value. Therefore, the distribution of encrypted digital assets must be in the global industry. In addition, the selling field and market share can be seen from the company's platform, and the issuer is also trying to expand its market space or platform in the selling field. It has a real planning and background, and moves towards this goal.

2. Circulation can stand the scrutiny and textual research of national laws

The issuance of encrypted assets cannot become a tool for illegal organizations, terrorist organizations, money laundering and tax evasion in various countries. In terms of long-term trend, encrypted digital assets must be easily included in the financial system and tax management of various countries, so as to have sufficient market space and development potential. This requires that the issuance management of encrypted digital assets must be subject to the supervision of the authoritative department and carry out real name registration.

3. Reduce the threshold of international financing and expand the social financing market

The issuance of encrypted assets is a breakthrough in increasing social financing methods, reducing the threshold of international financing, and expanding the social financing market. The crowdfunding method of direct marketing is an economic method based on the benefits of the lower society. Its greatest advantage is to enlarge the gap between rich and poor, promote everyone's participation, and provide a platform for all sectors of society to share prosperity. Therefore, the distribution of encrypted digital assets must have a wide audience.

Target market: any good input product is rooted in the market. In addition to international foreign exchange settlement and payment, crypto assets can also be subdivided by industry and Internet field under the cloak of payment function.

If you take off the cloak of payment function, the essence of encrypted digital assets is similar to stock issuance, which is also a financing means for enterprise development. Therefore, the emergence of cryptocurrency is a good thing from the perspective of market economy. It not only solves social financing, but also solves the gap between rich and poor in the lower society. From the perspective of China's macro economy, the rise of encrypted digital assets will push China's economy into the overtaking lane.

Speaking of this, I believe you have a certain understanding of why cryptocurrency is becoming more and more important and what its value is. In general, with the continuous improvement of blockchain applications, and the emergence of useful blockchains into the mainstream, the need for cryptocurrencies and other positions in your financial toolbox will inevitably become significant.