What Are Cryptocurrencies And Why Are They Such A Big Deal?

A peek into the FinTech world

BY: NAISHA DAHIYA

Did you know Bitcoin is not a coin that your dog bit ?! I’m sorry for the bad joke. Bitcoin among many others is a form of digital cash also called cryptocurrency. To understand the origin and function of this upcoming economic sphere, let's first talk about FinTech ! Financial Technology is the integration of technology into the applied financial sector. It includes areas such as payments, insurance, investment management, deposits and lending. This adoption of tech allows for faster, safer, productive and global connections in the finance world. Fintech companies use new technologies to offer financial services outside of traditional banking - and cryptocurrencies happen to be one of them.

In the simplest terms Cryptocurrencies store money digitally and simplify international payments through bypassing governments and financial institutions. Since they are decentralized, they are theoretically immune to any third party’s (government or central bank) interference or manipulation.So if the government isn't regulating it, who is? And how do we trust them? The answer is that no one single person controls such transactions, instead a web of computers do. Crypto operates on a Blockchain - a suite of distributed ledger technologies that can be programmed to record and track anything of value. Secured by cryptography, it is almost impossible to counterfeit or double-spend crypto. That already makes it 10x safer than any other form of fiat currency.

Since the beginning of time, exchange in economies has happened through tangible assets. The barter system was used to trade goods of value such as wood, then came the Lydians: the first western culture to introduce coins. Later other countries and civilizations began to mint their own currencies in coins made of precious metals. Ever since then we’ve explored new items to give value to, paper notes, checks, plastic cards and now we use cloud storage. Isn't that crazy ?! Looking at our current pace of progression, what do you think a cashless economy would look like?

The 2008 Financial Crisis was a revolutionary wake up call to the finance industry. Some of the factors causing this crisis were 1. Shortage of physical banking infrastructure 2. According to the World Economic Forum traditional services are failing in payments, insurance, investment management, capital raising and market provisioning. Fast growing international middle class 3. Failing trust in established financial services. The new FinTech space provides solutions to all these problems. Today, Fintech disrupts traditional banking by being direct, nimble, accessible and customer oriented.

Fintech and services such as Crypto come with a wide range of advantages that improve existing economic systems as well as increase social welfare. One of the most important advantages is the ability to ‘bank the unbanked’. Unbanked populations are simply those who don't have access to bank accounts or any other financial services. Many less economically developed countries (LEDC’s) do not have the infrastructure to provide such services to the majority of their population. In 2021, it is estimated that 20% of India’s, 71% of Morocco’s, 66% of Philippine's , and 54% of Columbia’s population still remain unbanked. In countries such as the United States, Immigrants are denied access to bank accounts just for being non-permanent US citizens. In such cases, Crypto allows any individual from any background to have access to financial services, without linking it to any third party such as banks.

The concept of cryptocurrencies was gifted to the world by an anonymous user going by the name of Satoshi Nakamoto. On October 31st, 2009 Nakamoto published the Bitcoin Whitepaper on metzdowd.com describing a digital cryptocurrency, titled "Bitcoin: A Peer-to-Peer Electronic Cash System". Since 2009, there have been thousands of new cryptocurrencies developed that disrupt the traditional banking system and change modern economic systems.