Digital currency is fast becoming mainstream and is the future of your money, according to an article in Forbes.
What is different between digital currency and physical currency is that with digital currency, there is never any physical form of the currency. Furthermore, digital currency is a decentralized form of finance, while physical currency, like the dollar, is known as fiat currency. What is fiat currency? Fiat currency is a form of monetary value backed by a government. The quantity shapes the value of the physical currency in the markets and the amount pulled back by the government.
Digital currency, on the other hand, finds its value through the demand for digital currency. In other words, demand is what puts the value of a digital currency. The more popular a token and coin are, the more valuable it becomes.
As of now, digital currencies are not considered legal tender, meaning that accessibility to certain goods and services isn’t required by law with any vendor. So instead, it’s up to each business to decide if they will choose to accept digital currency or not.
Now let’s explore the benefits of digital currency.
The Benefits Of Decentralized Finance
The inherent advantages of financial security, transparency, liquidity, and growth come from decentralized finance provided by digital payments and blockchains.
Accessibility by design demands greater accountability and transparency and promotes better custody of personal data. Unlike traditional financial services, this is a critical component of distributed ledger technologies that eliminate any middleman in a financial transaction.
It is a shared ledger between the two pirates in the transaction and nobody else, making for greater control of the asset. In other words, it’s peer-to-peer transactions and ledgers to aid in custody and ease of transfer in ownership.
Eliminating the middleman in financial transactions does a couple of things; one, it provides better transparency and control, and two, it lowers the costs associated with any financial transaction. The main benefits of decentralized finance include;
- Programmable
- Immutable
- Interoperation
- Transparent
- Permissionless
- Self-Custody
Programmable: The programmability of smart contracts allows for ease and automation of execution and the creation of new digital assets as financial instruments.
Immutable: Additionally, these new instruments are tamper-proof and unalterable, allowing for better security and easy auditing.
Interoperation: Developers have greater access to stack and compose a software that ensures greater integration between interfaces, protocols, and third-party apps.
Transparent: Greater integration requires more transparency in recording transactions.
Permissionless: The accessibility that crypto allows is different from traditional finance. With a digital wallet and internet access, anyone has the same ability to access the applications within the blockchain.
Self-Custody: Decentralized finance allows for the custody of assets, unlike traditional investment vehicles like common stock.
By having greater control and accountability within a community blockchain, decentralized finance
So now that you understand that there are more excellent controls in the transactions involving digital currencies, there is a lot of news regarding the growth of digital finance.
For one, Meta, formerly Facebook, is rumored to be exploring and developing its digital currency in the near future. The critical function will be that the coin is only usable on Facebook’s platform to entice users to interact within the platform on a more one-to-one transactional basis.
Additionally, professional athletes and musicians are exploring payments of contracts and endorsements in digital currency. The list of prominent athletes includes;
- Tom Brady of the Tampa Bay Buccaneers
- Trever Lawrence of the Jacksonville Jaguars
- Klay Thompson of the Golden State Warriors
- Andre Iguodala of the Golden State Warriors
- Shohei Ohtani of the Los Angeles Angels
Digital currency is becoming more popular. However, only one nation has made a digital currency, Bitcoin, a legal tender for El Salvador. As the popularity and value of Bitcoin becomes more stable, more countries could probably adopt digital currency as their national one.
But the pressure is growing. As the United States is the leader in digital payments, even the US Treasury has begun to explore the possibility of a nationwide digital token to be used as currency. Once it becomes more than a hypothetical in the United States, expect the global economy to follow suit.
By eliminating any middleman to validate and hold the currency needed in a transaction, digital currency, as the primary means to conduct transactions and business, are near to better transparency and accountability.
Much like the dollar replaced gold, the digital currency will replace the dollar. It’s only a matter of time.
