What is the purpose of cryptocurrency?

From a financial perspective, the purpose of cryptocurrency is multi-faceted. Firstly, it aims to provide a decentralized and secure mechanism for transferring value. Traditional financial systems often involve intermediaries such as banks, payment processors, and clearinghouses, leading to slower transaction times, higher costs, and potential security vulnerabilities. Cryptocurrency, utilizing blockchain technology, seeks to address these issues by allowing direct peer-to-peer transactions with lower fees and increased security.

Moreover, cryptocurrency serves the purpose of financial inclusion by providing access to banking services for individuals who may be underserved by traditional banking systems. This is particularly significant in regions with limited infrastructure or unstable currencies, where cryptocurrency can offer a reliable means of storing and transferring value.

As a store of value, cryptocurrency aims to provide an alternative to traditional assets such as stocks, bonds, and real estate. Its decentralized nature and fixed supply (in the case of cryptocurrencies like Bitcoin) can appeal to investors seeking diversification and protection against inflation or geopolitical uncertainty.

Additionally, cryptocurrency serves as a platform for financial innovation through the development of smart contracts and decentralized applications (dApps). These enable programmable and trustless agreements, potentially revolutionizing sectors such as supply chain management, intellectual property rights, and decentralized finance (DeFi).
The purpose of cryptocurrency from a financial standpoint is to provide a more efficient, inclusive, and innovative financial system by offering a decentralized means of value transfer, a store of value, and a platform for financial innovation.

Although cryptocurrencies like ETH and BTC are primarily used for trading and investing, the scope of digital currencies has expanded to include a wide range of uses beyond just buying goods and services.

Cryptocurrency's Versatility

Numerous retail giants like Amazon, Dell, eBay, and Microsoft have embraced cryptocurrencies as a direct payment method for their products and services, leading to an increase in the value of digital currencies. Virtual coins are gaining popularity as more people choose to use them in their daily transactions.

Smart Money

Blockchain-based smart contracts execute programmed code to achieve specific outcomes based on predefined conditions. This innovative feature allows for automated and secure transactions without the need for intermediaries.

Financial Services

Decentralized finance (defi) has propelled the growth of lending services, enabling individuals to obtain fiat loans by securing their cryptocurrency as collateral and vice versa. Platforms like Maker, Compound, and Instadapp on the Ethereum network are now managing assets worth hundreds of millions of dollars through credit protocols. Additionally, hodlers can earn annual interest by locking their cryptocurrency in these lending protocols.

Governance

Cryptocurrency is not only used for financial purposes but also for governance, empowering token holders to influence pivotal decisions in decentralized applications. Several crypto assets, such as 0x, Maker, Decred, and Dfinity, focus on governance to facilitate community-driven decision-making processes.

Collectibles

Non-fungible tokens (NFTs) serve as unique digital assets, representing in-game collectibles, virtual land, or property in virtual reality games. NFTs allow collectors and players to securely exchange assets while affirming ownership. However, it's worth noting that NFTs' value can still be influenced by central authorities, as observed with Cryptokitties.

Philanthropy

Cryptocurrency can play a pivotal role in combatting corruption within charitable organizations by ensuring transparent and accountable transactions through blockchain technology.

Education

An increasing number of schools and universities in Switzerland, Germany, Cyprus, and the United States are beginning to accept cryptocurrency as a viable payment method. This trend is poised to expand as digital currencies continue to gain popularity.

Crowdfunding

Many startups are turning to cryptocurrency to fund their projects, services, and products, revolutionizing traditional fundraising methods. Cryptocurrency offers an easily trackable and secure means of raising capital, disrupting the entire fundraising landscape.

Virtual money and cryptocurrency are becoming increasingly prominent not only in online discussions, but also in mainstream media, including television. The concept of digital currency is gaining widespread attention and many companies worldwide are embracing this form of money. Legal regulations regarding the buying and selling of bitcoins and other cryptocurrencies are also being established. If you are an active internet user, you have likely come across discussions about this evolving phenomenon.

Following the introduction of this new form of currency, there have been debates among users regarding its viability and future value. Bitcoin, in particular, has generated a significant amount of interest and speculation.

Before diving into investments and anticipating returns, it is crucial to delve into the intricacies of virtual currency, seek guidance from experienced individuals, and learn from others' experiences. Relying on advice from uninformed individuals, such as acquaintances or distant relatives, is ill-advised. Instead, it is wise to consult experts and review articles from seasoned professionals in the field of cryptocurrency.

What is the purpose behind the creation of cryptocurrency? It serves as a fast and convenient method for making investments exclusively using the internet. The emergence of cryptocurrency was a response to the demand for a public money system.

In addition to investment opportunities, cryptocurrency allows for online transactions and the ability to work across borders and receive wages. Unlike traditional national currencies, cryptocurrency eliminates the need for constant currency exchange and conversions, providing users with a seamless payment method that can be used worldwide without additional formalities.

Technically, cryptocurrency is based on the blockchain, a decentralized ledger system that relies on cryptographic encryption to convert and secure data into digital currency units. Access to the virtual wallet is controlled through a unique access code, ensuring that only the authorized individual can handle the transactions.

As there is no physical form of this currency, we can define cryptocurrency as virtual universal money, offering a new and innovative way of conducting financial transactions across the globe.