You’ve probably heard quite a lot lately about cryptocurrency. If you’re like most people, it’s also not something you’re terribly familiar with. The technologies of cryptocurrency and blockchain are still in their infancies, and just like with any brand-new innovation that has the potential to drastically change how we live our lives, many are suspicious of crypto’s abilities to be a successful upgrade to traditional banking systems.
The concept of cryptocurrency started as a grassroots movement by people who saw the limitations of traditional banking systems, and how they could be dangerous in terms of protecting your money, privacy, and peace of mind. So they created something that couldn’t be controlled by a single government or a handful of the most powerful people, but by all people, a form of payment and exchange that required only access to the internet, not the restrictions of geographical borders, governments, and regulatory entities.
It’s not as if traditional banking, credit, and fiat¹ currencies will be usurped by crypto any time soon, or even that they’ll go away completely. After all, when paper currency and credit eventually replaced the gold standard as the current exchange system, the gold standard still remained. Even so, cryptocurrency and blockchain technology have certain advantages over all of the above.
- Cuts out the middle man: Think about when you make a major purchase, like a house or a car or property. It’s usually a lengthy process with multiple hoops to jump involving lawyers, notaries, and others. But contracts made using cryptocurrency can be made without the need for third parties, considerably cutting down on both the time it takes to settle a transfer and the fees involved.
- No government control: For starters, cryptocurrency is decentralized, rather than complete control being consolidated in the hands of a specific government as it is with other forms of currency. Because no one person or entity controls cryptocurrency, it can’t be devalued or taken away from you according to the whims of a government.
- Everyone gets access: Many people around the world lack access to modern banking systems, but they do have internet and mobile phones, which means they can have a crypto wallet. Anyone shut out of traditional exchange systems can partake in the crypto economy this way, an avenue that’s especially important for people in underdeveloped nations as the world moves toward ever-increasing levels of globalization.
- Eliminates fraud: Just as a central government can not tamper with cryptocurrency, it is also by its very nature fraud-proof. Because it is both digital and decentralized, there is no way to counterfeit it as one could with paper currency. Likewise, reversals by the sender are impossible, unlike charge backs of credit card payments.
- Eliminates identity theft: Traditional credit and debit transactions are what we call “pull” transactions. Essentially, the vendor pulls the cost of the service or goods directly from your account—and all your personal information along with it. Exchanges made with cryptocurrency, however, are known as “push” transactions. A person sends only the amount of currency that they want a merchant or vendor to have and nothing more. No personal information is exchanged, eliminating the risk of identity theft.
- More efficient charity organizations: That efficiency of cryptocurrency transfers has a more specialized benefit when it comes to charity. Even the best charity organizations are forced to spend a significant amount of their funds on things like overhead and marketing. But without a middle man taking a percentage and a reduction of the number of transaction layers, cryptocurrency ensures that charity funds can be delivered directly to the people or organizations it needs to reach.
We’re only just starting to explore the advantages of cryptocurrency, with more benefits being discovered every day. That’s not to say there aren’t still risks involved—there are. It’s still a volatile landscape, and without a centralized government or bank holding control, it’s up to you as the individual to store your sensitive data and no point of contact to speak to if something happens to your crypto wallet. But while these risks and other challenges remain, such as government regulation and making cryptocurrency practical for daily use, there’s no doubt the potential of crypto is exciting.
The LGBT Foundation launched on January 12, 2018, aiming to capitalize on the potential of blockchain technology and cryptocurrency — alongside other technological innovations — for the good of the global LGBT community. For more information, visit our website or follow us on Twitter.