Cryptocurrency
Progress means new technology. Sometimes the new coexists with the old. And sometimes it replaces it, just as the computer replaced the typewriter and the cellphone replaces pay phones.Cryptocurrency may seem a marginal invention now, a plaything for cranks and nerds. But cryptocurrency is a disruptive invention that will entirely change the finacial world.
When your paycheck is deposited in your bank account, that money isn't there in the form of cash in a bank vault. It is a record in the bank's database, transferred from a similar database in the bank of the business that employs you. And there are auditing rules and government regulations to keep the transactions and the bank honest. When you open a bank account you are really renting time and space on the bank's computer.
So how does cryptocurrency change that? A cryptocurrency has a database, just as your bank has. The difference is the structure of the database prevents fraudulent transactions. Rather than trust the bank and the government, the cryptocurrency database has an extra layer of software and calculations. As long as you hold the keys to your cryptocurrency, that is, you have a non-custodial wallet, no one else can spend your currency. However, a custodial wallet, where another company holds your cryptocurrency in your name, is subject to fraud, just as your bank account is, if not more so, because they are not regulated as closely as banks.
So why is cryptocurrency disruptive? It posesses several advantages to a traditional bank. First, there is no "float," that period of time between when one bank sends money and another receives it. The float only exists to control the possibility of fround and is not needed with cryptocurrency. Second, the fee structure is different than a bank. You pay a fee with each transaction, while with a bank you ay a monthly fee. Third, your account won't be suspended, leaving you without access to your money. And there is no pssibility of a bank run, where a bank is unable to give you the money in your account because too manu other people have requested aslo requested theirs. Fourth, your transactions are more private. Not completely, but certainly more than with a credit card or check.
Are there any disadvantages to cryptocurrency? Yes, because transactions are immediate, you can't cancel a transaction if it goes bad. You are also responsible to keep the security of your keys. And the price of cryptocurrency is volatile. One bitcoin is always one bitcoin, but when you exchange it for dollars, the valued may have increased or decreased since you bought it.
Although the advantages of cryptocurrency may not seem clear yet, the world's financial system has seen them and each country is planning to release its own digital currency, called a CDBC (Central Band Digital Currency). However, their digital currencies will be subject to more inspection and control than private digital currencies. Bitcoin is not under the control of any group or government and thus offers more freedom and privacy. If both are important to you, you should work for sensible rules around crpytocurrency and wotk against or not use CDBCs.