In 2008, Satoshi Nakamoto was credited with the development of the first cryptocurrency in the world, Bitcoin. It is important to note that cryptocurrency arose as a means of bypassing the numerous disadvantages of the traditional modern banking systems. This includes things like centralization, financial independence, and affordable remittance even for the unbanned members of society. Over the years, some use cases of cryptocurrencies have become more popular than others.
5 Common Cryptocurrency Use Cases
- The Money Transfer Use Case
Large financial transfers across borders are typically slow through traditional financial systems. Even with modern e-payment methods, there are many limitations to money transfer including exorbitant transaction fees and long transaction times. With cryptocurrency, sending and receiving payments is done at high speed and low cost.
For example, a recent transfer of $99 million Litecoin (LTC) took approximately 180 seconds at just $0.40 as transaction fees. If such a transfer had been carried out using traditional means, it would have taken several days and attracted huge transaction fees.
- Cryptocurrency as a Store of Value
Cryptocurrencies are run using a supply mechanism that prevents inflation and increases their inherent value with increasing demand. It isn’t affected by conventional variables. One Bitcoin will always be one Bitcoin. Traditional currencies, on the other hand, lose value over time due to inflation and other economic factors.
The value of fiat money is typically a reflection of the country’s economy. So, in countries facing economic crises, fiat cannot serve as a true store of value. Even in working economies, the value of fiat diminishes slowly over time.
- Lending and Borrowing
Getting a loan is always a stressful process, especially when visiting banks or any other money-lending institution. The queue, the paperwork, and the lengthy process always make it difficult and there is no guarantee that the loan will be granted.
With the advent of cryptocurrencies, decentralized finance applications have made lending and borrowing extremely easy. Individuals are allowed to borrow or lend funds almost instantaneously.In addition to the speedy process, an individual can borrow money irrespective of their country of residence.
- Decentralized Storage Use Case
Centralized cloud storage facilities have several shortcomings, noteworthy among these are the high server fees, server outages, and huge server maintenance fees. However, decentralized storage platforms, which are based on blockchain technology, have solved many of these issues.
Nowadays, with the use of blockchain technology, anyone can rent out their free storage space. For example, if an individual had 300 GB of free space on their disc, it could be rented out on a decentralized storage platform (such as Filecoin).
- Censorship-resistant Store of Wealth
Saving tons of money in the traditional banking system is plagued with numerous problems. For starters, the bank will always scrutinize your sources of income, or even freeze your account due to suspicious activities. Without warning, a new governmental policy may affect your interest in savings.
Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Dogecoin, and the likes are censorship-resistant. This means that only the individual with the private keys to the wallet has access to the stored wealth. Hence, no personal cryptocurrency wallet can be frozen by governmental authorities.
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