The world is very near to a revolution in terms of information sharing, which is transitioning from simply a result of communication to a way of transferring and quantifying value and wealth. Gone are the days when money was the exclusive property of banks. Nowadays, anyone with a working understanding of the science of involved can now be his own bank, thanks to decentralized currencies.
A decentralized currency or peer-to-peer money is a bank-free method used to transfer wealth or ownership of any other commodity without needing the service of any third party. This method doesn’t only allow for the radical change in the notion of money; it can also revolutionize how information can be gathered and stored in voting system, libraries, public registries, and any other database systems.
Understanding Decentralized Currencies
Most nations follow the fiat currency model, which means that all currency value for that nation is controlled by the central bank. That value is backed only with how much the bank is willing to oblige. This value is then represented in physical items like paper bills, coins, and bank instruments.
Meanwhile, a decentralized currency’s value is represented by the currency’s “coin,” which is an encrypted piece of computer code that is difficult to reproduce but easy to verify. The coin has two private keys: one which anchors it to the host blockchain and another that infers ownership and is held in the “wallet.”
A coin’s private key can be transferred peer-to-peer, which means that all that is necessary to transfer a coin is a recipient with a compatible wallet. The value of the coin is found purely on the current demand of the coin, and without a central governing body having influence over it.
What this tells us is that the value carried by a coin lies fully in the hands of the end-user and it cannot be inorganically modified or altered.
Decentralized Currency’s Benefits
A currency that doesn’t need a bank, like bitcoin, is free of national monetary policies. For residents of countries that have destabilized fiat currencies, a decentralized currency can serve as a stabilizing agent and an alternative.
Secondly, a decentralized currency can insulate customer from bank failures and collapses as well as lofty bank fees and aggressive bank policies.
Payments are also borderless, allowing for seamless and cheap international payments in spite of the current limits on transnational fiat payments.
Decentralized currencies are quite obviously not affected too much by either inflation or deflation.
The only requirement you’ll need for using a decentralized currency is the ability to obtain and use a digital wallet. This makes decentralized currency appealing to the underbanked or unbanked regions.
In addition, decentralized currencies are not subject to location-based exchange rates. This means that goods and services bought with decentralized currency will not be devalued because of tariffs and unfavorable changes in national monetary values.
Lastly, decentralized currencies are real-world manifestations of the blockchain technology, and this fuels the further development of decentralized applications.
