In times of increasing prices, greater expenses, and unstable markets, people look for more opportunities to gain higher value. Alongside stocks and real estate, crypto investments have become an increasingly common choice. But how have cryptocurrencies become so popular? How has decentralization changed our concept of investments?
Let’s have a look at the answers.
Crypto: from day one to today
The cryptocurrency era began in 2008 with Bitcoin as the first asset on the market, even though the idea of crypto lies back in 1983. David Chaum (a cryptographer) looked forward to having a currency that could be sent without any centralized entities (Evan Jones, 2023). A quarter of a century later, Satoshi Nakamoto created Bitcoin, which was developed to rely on public key cryptography. It is where users who receive Bitcoins send their public keys to users who transfer the coins (Britannica, 2024). The transfer is signed with private keys and transmitted over the Bitcoin network, where no Bitcoin can be spent more than once, and the transactions are anonymous.
Over the years, the crypto market has expanded quite a lot. Now, there are plenty of coins to choose from, some of which are even used in computer games in exchange for tokens within the games (e.g. Axie Infinity). However, the market is rather volatile and such instability is “both attractive and potentially devastating” (Evan Jones, 2023). Economists also say that cryptocurrencies don’t have the same function as money, and thus cannot replace money (Britannica, 2024), or at least not in the near future. Yet, blockchain technology possesses the potential to transform various industries.
Centralization vs. decentralization
You’ve probably heard that cryptocurrencies work in a decentralized system. Let’s discuss the differences between centralization and decentralization to understand why.
The centralized system has a predefined hierarchy where the highest level has authority and power over the data and functions. For example, the Meta platforms operate in such a system and can limit the number of users they can have within the platforms. Centralization has very little privacy as personal information is accessible to the centralized data service providers. As users, we give permission for our data to be accessed when we accept the platforms’ terms and conditions upon registration.
– Even though communication within the system is transparent and centralization is easily manageable, downsides are also at hand. Handling tasks and inquiries can take longer due to an increased workload, leading to delays, and decision-making takes place only at the highest level of the hierarchy, whereas staff members only execute.
The decentralized system has multiple levels at which decision-making takes place to ensure equality. It is a secure network with much more freedom. Being part of the decentralized world also saves you time and the system seems to be future-proof with a prospect of an increasing implementation in various segments. In a financial aspect, DeFi (decentralized finance) uses blockchain technology to ensure that third parties and centralized institutions are not part of the financial transactions within the system.
– Since it’s an unregulated system, DeFi can still be quite vulnerable. It also doesn’t provide complete anonymity, as transactions are traceable. Still in its learning phase, it is yet to be perfected and cleaned of errors along the way. The system can be quite pricey for an organization, too.
The new ways to manage your finances
Crypto has diversified the way many institutions operate: healthcare, media, and banking. It gives new opportunities for them to grow and function in a divergent capacity (Bitpanda, 2024). The expansion of digitalization on a global scale looks promising and trends show that more industries have the potential to adopt a decentralized system for their financial operations. Even though crypto investing can still be risky, in the future, there will be new laws and regulations in each country that will define, shape, and improve the crypto market (Jim Pendergast, 2024).
Moreover, experts believe that a hybrid system of centralization and decentralization will work best as it will improve the opportunities to gain and invest. Security is key for any money-related issue, and centralized systems have greater protection from cyber criminals, making crypto investments safer than they are now.
Crypto’s worth
The variety of cryptocurrencies is wide, but Bitcoin remains the most preferred among investors, especially because of the continuous expectations of its rise – currently (26th of September 2024), Bitcoin’s price is above $60,000. But what determines each asset’s price? There are several factors that play a role, such as supply and demand, utility, market sentiment, etc.
If the demand for crypto coins is high, but the supply is low, the coin price goes up, and vice versa (Michelle Legge, 2024). Unlike fiat currencies (dollars, euros, pounds…), cryptocurrencies are not controlled by a central government or a bank Thus, many of them have a total supply to avoid devaluation through inflation (Michelle Legge, 2024). It means that cryptocurrencies have an estimated overall token quantity for their eventual generation and distribution. Keep in mind that not all coins have a supply limit.
When choosing a coin to buy or sell to make the most out of it, do your own research first and foremost. Crypto’s worth is not permanent and, as mentioned, the prices vary every day. Check the assets’ recent history and price fluctuation, even though they do not indicate future results. Seek professional advice before you take any steps in investing, and don’t spend all your savings. Instead, create a separate budget for investments and only invest what you’re willing to lose.
If you’re looking for new investment opportunities, you can start with iCard. Choose from more than 250 cryptocurrencies for your portfolio and begin your journey. For any assistance, reach out to support@icard.com.
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