Let’s say I perform one hour of consulting services for your business and you decide to pay me in Bitcoin instead of US Dollars, the transaction is pretty straightforward. You send me Bitcoin from your wallet to my wallet, kind of like sending a PayPal payment, or even an email from your email address to my email address (but in this case a wallet address). The Bitcoin gets sent to me within seconds and I can just hold it in my wallet, or send it to my bank account through an exchange like Coinbase.
So what are some of the advantages to using Bitcoin over regular money?
#1: Cryptocurrency transactions are irreversible
This means there is no possibility of a chargeback for that transaction (so annoying). Once a payment has been made, it can’t be reversed. The reason it can’t be reversed is that it is now and forever recorded on a decentralized accounting ledger called a Blockchain. A network of computers around the world validated your transaction and it is now “written in stone” on the Blockchain. Since there is no central authority, there is no way a transaction can be overturned.
#2: Cryptocurrency payments are decentralized
Since the transaction took place in a decentralized accounting ledger, no banks or middlemen were involved. Because it is decentralized, each individual using this payment system has equal authority.
#3: Cryptocurrency transactions are secure and anonymous
If you were paying me in cash, that paper money could be counterfeit, but there is no way to counterfeit Bitcoin or another cryptocurrency. Cryptocurrencies use cryptographic protocols – extremely complex code systems – to protect sensitive data transfers. Cryptocurrency developers build these protocols on advanced mathematics and computer engineering principles that render
them virtually impossible to break, meaning they can’t be counterfeited or duplicated. These protocols also mask the identities of cryptocurrency users, making transactions and fund flows difficult to attribute to specific individuals or groups.
#5: Cryptocurrency transactions are inexpensive
If you were paying me my consulting fee ($200 per hour) via a credit card, many people and entities would be involved and fees would be added along the way. That means that, as a merchant, I would have to take less money than l am owed for the convenience of the customer being able to use a credit card. In a typical credit card transaction, there are actually 5 parties involved: consumer, merchant, issuer, acquirer, and the switch. One of the prominent features of cryptocurrencies is that users are not required to pay huge transaction fees. The transactions, in most cases, are free or nearly so.
#6: Cryptocurrencies are liquid
The simple explanation is that when you pay me in Bitcoin, I can easily sell it for US Dollars or whatever fiat currency I chose, as long as it is supported by the exchange I’m using.
#7: Cryptocurrencies are finite
In most cases, there is a finite supply built into the code of a cryptocurrency. In contrast, the supply of any fiat currency can change at the whim of the government that issues it. Now compare that Bitcoin. There will never be more than 21 million Bitcoin, and this finite amount will drive up its value as demand increases. Over time, it becomes increasingly difficult for miners to produce cryptocurrency units until the upper limit is reached. Cryptocurrencies’ finite supply makes them inherently deflationary. They are more akin to gold and other precious metals because of these limits, compared to fiat currencies that central banks can, in theory, churn out in unlimited numbers.
So what do you think?
Do their advantages outweigh fiat money?
Let me know in the comments! And if you’d like to learn more about this topic and others check out Crypto.IQ and use code “jsherm” to get a super discount.
You can also watch an episode about Advantages to Cryptocurrency in our web series “Mastering Cryptocurrency” right here featuring Bitcoin Legend Charlie Shrem and Serial Entrepreneur Jason Sherman: