Overcoming Fears: Is Cryptocurrency a Path to the Future or a Repeat of Past Mistakes?
The collapse of America’s largest banks provoked a wave of negativity as some were left with frozen assets while others now do not know where to keep their money. It turns out that there are no guarantees that tomorrow our account will not be blocked and insurance payments will remain in question. If you don’t believe you can ask those who held their deposits in Capital One Bank and Keybank Bank. Just recently the New York Banking Commission has decided to “freeze” their assets due to the threat of bankruptcy.
In the light of this most people rushed to find an alternative. In this case cryptocurrency is an option for diversifying savings.
Many of us still do not have a clear understanding of the scheme for moving funds in the blockchain and therefore doubts are born about this technology. There are some logical questions that need to be answered. How secure is the blockchain? Is it possible to transfer money as simply as with a bank card? And most importantly is it able to save savings?
We have found answers to these questions. However, does an ordinary person need to understand how the blockchain works in order to use ordinary transfers?
New Always Breeds Fears
In the world of financial innovation fears and doubts inevitably arise. Cryptocurrency as a new financial instrument is no exception. Let’s draw an analogy and remember history by looking at the example of Western Union.
Despite initial difficulties the wire transfers through Western Union have become an integral part of the lives of many. Convenience, speed and affordability attracted the attention of a wide audience. Thus, the system has overcome its “child diseases” and has established itself as a reliable tool. But it has not always been so good.
At first, users experienced delays in receiving transfers or encountered technical problems that repeatedly led to incorrect processing of transactions. This caused dissatisfaction and loss of trust on the part of customers.
In addition to the problems associated with delays high fees and limited geographic availability, Western Union also faced other challenges and difficulties in its development. Over time all this has been fixed but the only thing that the company could not avoid was fraud. Western Union continued to be a target for cybercriminals due to the connivance of management.
“Western Union Admits Anti-Money Laundering Violations and Settles Consumer Fraud Charges, Forfeits $586 Million in Settlement with FTC and Justice Department
Company also agrees to implement anti-fraud program and enhanced compliance obligations in agreements with federal authorities”.
Even such a major financial institution has shown a clear disregard for its obligations to customers by not guaranteeing compliance with the Bank Secrecy Law. What can be said about the rest?
Transaction Security
In 2020, the financial world has experienced a surge in fraudulent transactions. Credit and debit cards occupied a leading position among all means of payment associated with fraud. Especially often criminals attacked small businesses which became their main target.
In this difficult time cryptocurrency has become a symbol of security. Unlike credit card payments a blockchain is a reliable and secure way to send money.
This reliability is based on the absence of the need to verify transactions by an intermediary bank. When a client makes a payment using cryptocurrencies his personal data do not remain in a centralized repository where information leaks have become almost inevitable. Instead, the recipient only sees the wallet address and nothing else.
Cryptocurrency is a new word in providing the transfer security. Times are changing and we have the opportunity to choose better ways to protect our business and personal data.
Looking for an Efficient Way to Transfer Money
Blockchain and the banking system are significantly different in terms of transactions. In a classical financial system the process of transferring funds passes through intermediate institutions such as banks or payment systems. These institutions play the role of intermediaries and verify transactions, set rules and provide security.
On the other hand, a blockchain is a decentralized system where transactions are recorded on a chain of blocks. Each block contains information about the transaction and these blocks are linked together using cryptography. In this way the blockchain supports the direct transfer of digital assets from one participant to another without the need for intermediaries. It’s as easy as sending an email.
It is difficult for an unprepared person to understand how smart contracts work in a blockchain but the system is so simple and reliable that there is no need to understand how it works. To transfer it is enough to have a wallet and know the address of the recipient. Everything is the same as if you are using your bank application.
Asset Freezing
Bank transfers have long been the standard way to move money. However, in this case you rely on the bank expecting that it will pay out the funds or transfer them at your request. But what if the bank suddenly freezes your account? In such a situation you are a hostage.
Cryptocurrency and blockchain in particular offer an alternative approach where you are in complete control of your assets, freeing yourself from the need to trust a third party.
Let’s look at how cryptocurrency solves the problem of capital preservation and ensures the safety of assets.
By using a cryptocurrency wallet you will never be at risk of having your account frozen. Coins are stored in the blockchain and the blockchain does not have a specific ownership because it is a decentralized technology in which there is no single controlling body or central authority. There are only users who only support the system operation and do not interfere in the transaction processes.
In simple terms the blockchain is a kind of core the functioning of which is supported by various participants among whom there are “miners” (for the Proof of Work system) and “validators” (for the Proof of Stake system). It is them who perform computational tasks and verify transactions but no more.
In the traditional banking system, the account can be blocked and this is not news. If it seems to the security service suddenly that you are engaged in suspicious activity then be prepared for the fact that your account will be blocked without any warning. There are many reasons for this, among which there may be suspicious activity, a large number of transactions of the same type, and so on.
In the blockchain the asset management is carried out through smart contracts which are accompanied by a set of conditions and they cannot be changed. Cryptocurrency and blockchain provide the principle of equality where the majority of network participants fulfill their duties according to the prescribed rules – your transaction will be completed in any case and no one cares where you got this or that amount of money.
Anonymity and Commission
What really attracts in the blockchain is the lack of verification. In traditional financial systems every transaction requires the disclosure of personal information and customer credentials.
In the blockchain all transactions are recorded in a public distributed ledger without direct linkage to a person. When registering a wallet you are simply given its address. And you can get dozens or even hundreds of such addresses.
Payment of commissions and fees associated with transactions and the installation of payment systems sometimes takes a significant part. For example PayPal charges around 4% for every transaction and sometimes even more. While for cryptocurrencies these costs are noticeably lower if they are charged at all.
This is how a normal wallet-to-wallet transfer looks like. When you send $26,000 you pay only $2.24 in fees and the transaction is completed within minutes. Now try to make the same transfer at the bank. How long will it take you, and what costs will you have to pay?
In addition if your business works with clients abroad using cryptocurrencies will help you avoid fees for international payments in different currencies. Cryptocurrencies are not tied to a country of origin or a national bank so businesses are not dependent on waiting for foreign financial institutions to clear payments or pay related costs.
In Conclusion
It is worth thinking about our fears and doubts in relation to new technologies, especially blockchain. Do we trust the banking system enough to be sure that our money will be protected and returned in the event of a crisis? Perhaps our hopes are not well grounded.
Mastering new approaches to blockchain transactions can be the key to the security of our savings. The sooner we begin to explore and use this innovation the greater the chance that our funds will be protected and preserved.
Now that bitcoin is becoming legal tender in some countries and we see a growing interest in cryptocurrencies it is time to overcome our fears and prejudices. These may be new opportunities for our future and our financial independence.
Therefore, let’s open up to new approaches, explore the blockchain and accept it as an opportunity to ensure the security of our savings.
Expert Opinion
Lado Okhotnikov, CEO of Meta-force.space, former CEO of Forsage.io
Imagine you are able to use cryptocurrencies without having to delve into complex technologies or smart contract details. Just install the wallet on your smartphone or download the browser extension. And for this you do not need to reveal your identity since opening a cryptocurrency account does not require personal data, phone numbers or guarantors. This gives the freedom to make transfers to any holder of a crypto wallet without conditions and the risk of being subject to verification.
Obviously this ease of use and anonymity is a strong advantage to freely exchange digital assets without revealing personal information. In addition, thanks to the use of blockchain technology the cryptocurrency provides transparency and security of transactions which strengthens the trust in the system.
You can carry out financial transactions without being exposed to intrusive advertising. This freedom allows you to control your financial life and conduct transactions in accordance with your own rules. Cryptocurrency provides an opportunity to look at financial transactions from a new perspective, taking into account the usability, anonymity and decentralization of the blockchain.