The concept of cryptocurrency has been around for decades, but it has only begun to be widely adopted in recent years. While cryptocurrencies like Bitcoin were once considered the sole domain of tech-savvy early adopters and criminals, they now have the potential to reshape the global economy. Here’s how:
The U.S. Dollar and Credit Cards Have Dominated Payments
You may have heard that the U.S. dollar is the world’s reserve currency, but what does that mean?
Well, it means that most countries around the world need to have a certain amount of U.S. dollars in their reserves to conduct international trade with other countries and pay for imports and exports. This means the U.S. dollar is used as an accepted form of payment by most people buying or selling things internationally (not just American products, but also products from all over the world).
Even if you don’t live in America, you’re probably using U.S.-backed credit cards like Visa or Mastercard to make purchases online. However, these transactions and cash aren’t backed by any commodity like gold. Instead, they are supported by the trust of the economy and the institutions behind them. But, blockchain technology and cryptocurrencies offer an alternative economic system that could add transparency and accessibility to the global economy currently dominated by USD.
DeFi (Decentralized Finance) is Transforming Banking
Decentralized finance (DeFi) is a financial system that does not rely on centralized institutions, such as banks and other intermediaries.
DeFi has become increasingly popular because it offers individuals access to an array of financial products previously out of reach or only available through third parties. These products include lending, borrowing, investing, and insurance—all without going through traditional banks or other financial institutions. ETH USD, BTC USD, and AVAX USD are just a few popular pairs traders can choose from on some exchanges. Trading crypto pairs helps crypto traders worldwide benefit from this growing marketplace, regardless of their fiat currency.
You can now invest in assets like stocks, bonds, and cryptocurrencies without relying on a bank or intermediary for approval or trustworthiness. It also means that if your local currency suffers from inflation or market volatility (as many have in recent years), you may be able to hedge against those risks using DeFi instruments like stablecoins (e-currencies with relatively low volatility).
Crypto Makes it Easy to Send Money Internationally
From a user perspective, crypto makes sending money internationally and quickly easier. Crypto is faster than traditional banking because it doesn’t have to go through the same long series of checks, balances, and approvals that banks do. And crypto is cheaper than traditional banking because no middlemen are taking a cut of every transaction. Anyone with access to the internet can use a crypto exchange app like FTX to access the crypto market and invest in blockchain projects or send money securely.
Crypto also makes it easier for people who don’t have access to traditional financial services to access them now—which means they can begin participating in the global economy just like anyone else. This is especially important in developing countries where remittance payments are a significant part of their GDPs.
This combination of speed and cost savings will accelerate adoption rates across all sectors—and, more importantly, bring more value into emerging markets worldwide.
Blockchain Has Uses Beyond Cryptocurrency
Blockchain technology has uses beyond cryptocurrency. Many industries and organizations are exploring the potential of blockchain to manage their data in a more secure, transparent, and efficient way.
One everyday use of blockchain is to track products throughout the supply chain. If you buy a pair of shoes from a store or online marketplace, you can see exactly where they came from. Every step along the way will be recorded on the ledger: workers at different facilities will have access; customers can check for themselves that their clothing is not being made in unsafe or unsustainable conditions; governments know where products have been imported from and exported to—and what taxes have been paid along with them; etcetera. These technologies will help drastically reduce instances of fraud along supply chains and manufacturing processes. Transparent supply chains give greater power to the consumer to discern between companies with good, safe practices and those with unsustainable and controversial business methods.
The world of finance is changing fast, and it’s not just about cryptocurrencies. Blockchain technology has enormous implications for business and economics as well. Decentralized finance (DeFi) will completely change how we interact with money and banks. You can learn more about decentralized finance through the FTX knowledge base and start investing in cryptocurrencies today.