Writer’s name: Rabin Neupane
Introduction: Historical aspects of Currencies
As far as we can remember, fiat currencies have always been around us. Trade and commerce, research and development, quality of life, and the extent of self-satisfaction are impacted by these currencies.
The concept of fiat currencies came into existence when our ancestors grew a sense to conduct business activities with something consistent in worth and that can not be forged. These currencies have undergone many different changes since its existence – from a hideous leathery look to a fine, crisp finish at present.
As time passed, currencies started getting more reliant on the government, especially after US president Richard Nixon decided to ditch gold standard for fiat currencies. After that move, the world moved from a commodity-based economy to a fiat based economy. The commodity-based economy–though flawed in its design– was much more transparent while the fiat based economy through much more fluid and business-friendly gave too much power to the government.
The digital currencies
In modern times, the general perception of the fiat currencies turned around in 2008 with the introduction of Bitcoin. It was offered as an alternative to the fiat currencies system with the concept of global, electronic money. What could have been a major reshuffling on the concepts on currencies met a lukewarm response when almost all people upheld their denial on the efficient, neat, dependable working abilities of the nascent concept, the Bitcoin.
Cue to the present time to see how fast the general perceptiveness has swapped in the benefits of Bitcoin. Was it because Bitcoin gave the sender the ability to transfer money without falling under the radar or was it because the money movement was quick and the incurred fee was comparatively low? Trends have shown that people have preferred Bitcoin to the traditional approach of money transfer for a variety of personal reasons. Sending as low as 30 cents as a remittance to anywhere in the globe sidestepping any economic sanctions or barriers. You name it, Bitcoin has it.
How does it work?
Transacting using Bitcoin, for example, sending remittance to your country of choice, eliminates the necessity of having an account in a guardian financial institution, in a commercial bank, or in any of its other forms. You just need to have the required funds in your wallet from which you would have to buy the equivalent bitcoin. Then you have to send it to the recipient address. The recipient would receive bitcoin in crypto trading platform, which could be withdrawn and sold in equivalent fiat currencies in the same platform.
There are two ways a person can buy bitcoin – one is on a peer-to-peer marketplace and the other is through a traditional Bitcoin exchange. On a traditional Bitcoin exchange, the buyer has to go through the KYC process which involves sending IDs and selfies. While on a peer-to-peer bitcoin trading platform, depending upon the agreement between the buyer and seller, KYC can or can not be applied and is usually more convenient, aligning with the peer-to-peer spirit of the bitcoin itself.
Therefore, it is seen there are three very useful fundamental concepts – transaction input, transaction output, and the amount. Transaction input is the address from where the Bitcoin amount is sent; the place where the amount is received is called transaction output. Lastly, there is a security key called a “private key”. The key is there to confirm the transaction from the sender’s end and also in preventing foreign alterations once the transaction is being carried out. The key is also symbolic of being the owner of the Bitcoin Wallet.
What advantage would you have by using bitcoin?
The liquidity that the Bitcoin offers surpasses the liquidity of traditional, fiat currencies. Bitcoins can be exchanged into local currencies around the globe. Similarly, borders and international trade barriers have no meaning to the transfer of money using Bitcoin. Also, the overhead cost incurred while sending remittance is too low since the Bitcoin is a pure peer-to-peer cryptocurrency trading system where the government and banks don’t come in the play. As a result, the customer can save up to 75% while completing the transaction within a day using Bitcoin transactions.
The popularity of Bitcoin is rising. Take Japan for example – the tech giant country has given recognition to the Bitcoin as an alternative payment method in its retail market. USAA and Simple Banks are two examples of US-based banks that accept Bitcoin.
In short, Bitcoin is faster, more confidential and more hassle-free than the traditional remittance sending process. It is a very incentive-based technique which aids money transfer in cleverly designed architecture bypassing government and banks. Since the banks don’t come in the picture, the need to have multiple accounts for cross-border transactions becomes useless. A bitcoin wallet is enough to transfer money to anyone anywhere in the globe and the transaction fee incurred is comparatively low. As the Bitcoin as a virtual currency, the credit risk is greatly reduced. Due to the obvious advantages, the popularity of Bitcoin is on the rise.
Writer’s name: Rabin Neupane
Bio: Mechanical Engineer by day and blockchain enthusiast by night