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How do cryptocurrencies help developing countries grow?

Published: (Updated: ) in Finance Advice by .

How do cryptocurrencies help developing countries grow?

How do cryptocurrencies help developing countries grow?

Digital currencies get considered a unique instrument that supports developing countries and helps them grow or expand. In this article, you can learn about cryptocurrencies impact on individuals and organizations, especially in developing countries. Cryptocurrencies can provide the best advantage by eradicating trust and providing worldwide access to payment systems. These digital currencies are considered a medium of exchange that helps developing countries grow extensively by enhancing the financial addition and provides the best way to trace funds and get away from poverty.

Overview of cryptocurrencies

To understand the opportunities that cryptocurrencies offer, it is first crucial to understand the pros and cons of these digital currencies. Bitcoin became the first cryptocurrency that has decentralized nature and is based on the proof of work consensus method. This article focuses on understanding the pros and cons of bitcoin or other cryptocurrencies by comparing them with fiat currencies issued by banks. All the cryptocurrencies other than bitcoin get referred to as altcoins. Bitcoin and altcoins are dependent on a technology known as blockchain technology. Use the official app to learn about trading bitcoin and earning profit.

In simple words, blockchain is a database or record that is public and distributed over an extensive network on multiple computers. All the entries of cryptocurrencies get stored or summarized in blockchain in the form of blocks. First, let’s discuss the first cryptocurrency that is Bitcoin. In technical terms, the algorithm keeps a record of all transactions between peer-to-peer transactions decentralized and broadcast all the transactional records to the entire network. As a result, Bitcoin is the first and the most prominent digital currency across the world.

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Bitcoin got introduced in 2008 by Satoshi Nakamoto, and at first, its white paper got released that stated bitcoin as a peer-to-peer electronic medium of exchange. Then, another cryptocurrency that got launched is Ethereum. It is also an open-source, public and cryptocurrency that is blockchain-based. Cryptocurrencies aren’t only a medium of exchange but also act as a store of value. Investors today are investing their money in cryptocurrencies to earn greater returns. So, let’s understand about pros and cons of using or accepting cryptocurrencies.

Pros and Cons of cryptocurrencies

The first and most crucial advantage of cryptocurrencies is that they offer transparency and accountability. These are the advantages that promote trust and allow interactions between two different parties. Blockchain is the underlying technology of all the cryptocurrencies that utilizes digital keys (public and private keys), proof of work consensus method and hash functions. Though bitcoin and other cryptocurrencies don’t depend on trust, the users or parties still have to trust blockchain and bitcoin networks. It is the main reason why it is essential to protect the blockchain against hackers and attacks.

In fiat currencies that get issued and regulated by banks, users have to trust the third parties while storing and making transactions. Transactions that third parties process are often quick, but these involve high transaction fees and risks. Another significant benefit of cryptocurrencies is decentralization, and no government or banks manage or regulate these currencies. A unique thing about cryptocurrencies is that they are global and aren’t restricted to any particular geographical area.

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Bitcoin allows fast and easy transfers without involving any high transaction fees. As a result, bitcoin transactions are cheaper as compared to government-issued cryptocurrencies. Though these transactions aren’t limited still there are multiple negative aspects of it. First, it is easier to transfer bitcoin and other cryptocurrencies, but transferring money has led to many illegal activities. Second, because there is no government involvement, no one can keep track of money transfers. Third, it provides ease to hackers to attack digital coins.

Also, a significant disadvantage is that there is a lack of flexibility in the supply of bitcoin as there is a fixed number of coins. The decentralized nature and less flexible supply result in the price volatility of bitcoin. High volatility is the main reason why most people avoid investing their money in cryptocurrencies. Therefore, no involvement of government and fixed supply gets counted as both advantage and disadvantage.

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Finance Advice 2021