There’s no denying that cryptocurrencies have become a permanent fixture in our financial landscape. Since their invention, adoption, and consistent presence in mainstream media, cryptocurrencies are here to stay. Let’s take a look at how cryptocurrency transformed the whole financial system, and why the nascent monetary system isn’t going anywhere.
In The Beginning
To understand the full impact of how cryptocurrency transformed the whole financial system we must look to the beginning. From 2007 – 2009, the world suffered from a devastating global recession, crippling the housing market and sending millions of people home without work. Largely due to failures within the banking system, one anonymous entity started working on an alternative “banking system”.
In October of 2008, Satoshi Nakamoto released the Bitcoin whitepaper and laid the foundations that would change the future of the world entirely. Not only did he introduce us to a new form of value transaction that doesn’t require banks or governments, but the anonymous entity also introduced the world to blockchain technology that could be used across a multitude of industries. While the initial launch of the technology only reached a small number of developers, the word quickly spread and more and more individuals quickly became aware of the advantages and use cases of both cryptocurrencies and blockchain.
The Many Use Cases Of Cryptocurrency
The advent of Bitcoin and its open source coding opened the door for many cryptocurrencies to follow. Instead of keeping the technology under wraps, Nakamoto shared the details with the world, and encouraged developers to explore and understand blockchain technology themselves. This resulted in many different cryptocurrencies coming into fruition, most solving a unique problem within the financial ecosystem or the world at large.
Bitcoin introduced the world to peer-to-peer transactions that didn’t require a mountain of paperwork or a bank’s approval. Bitcoin also offered users a store of value, a place to keep funds outside of the traditional banking systems. As more cryptocurrencies have come to light, many more use cases have emerged. Ethereum offers a platform catered towards business and project development with features like dApps and smart contracts, Ripple offers financial institutions a faster and cheaper means to send money cross border, and Monero offers a strictly private and anonymous means to send money from one individual to another.
How The Financial System Changed
When looking at the emergence of cryptocurrencies and their direct impact on the financial system, several factors come to play. Below are a few of the direct impacts that cryptocurrency had on the monetary systems around the world:
- Empowering the Unbanked
It is estimated that 1.7 billion people are unbanked and left on the outskirts of financial inclusion. For the first time, individuals who don’t meet the criteria or don’t have access to formal banking organisations can freely and efficiently exchange and store value. Without discrimination, cryptocurrencies only require that you have an internet connection to be able to transfer and store them.
- Central Bank Digital Currencies
With the rise of cryptocurrency adoption, many countries are creating their own digital currencies. These central bank digital currencies offer the advantages of cryptocurrencies but without the volatility as they are pegged to the local currency. China is working on a Yuan-pegged digital currency, Venezuela has created their Petro and Dubai has created their own version called emCash. Many more are following suit.
Ethereum paved the way for the latest revolution in the cryptocurrency ecosystem. The world of Decentralized Finance offers investors the opportunity to tap into several traditional financial instruments, only this time through the use of cryptocurrency. It is estimated that there is already $8 billion worth of digital assets already locked in the DeFi industry, and this number is only set to increase. Investors both inside and outside of the cryptocurrency community are cashing in on the DeFi movement.
The World As We Know It
Since Bitcoin came into existence, and 7,000 more according to CoinMarketCap, the financial system has been transformed. International transactions have greatly evolved, with faster and cheaper options available, as well as the ease at which to send money across borders. Cryptocurrencies and blockchain technology have created countless jobs, distributed high volumes of wealth, and have changed the way we see money entirely. Through these small but impactful actions, that is how cryptocurrency transformed the whole financial system.