Never mind. Cryptocurrencies have attracted sharp criticisms and admirations not necessarily in equal measure. But there is no single payment system that is perfect -- even the so-called fiat have their own shortcomings -- so many shortcomings that everyone has experienced one way or the other; and it is only obvious to ask what the solution to those shortcomings could be.
Yet the mistake we could make is falling to the notion that fiat and crypto systems are at this moment perfect and needs no fix. And so while crypto may not be the perfect fix yet, there are many reasons that make them suitable being part of monetary systems even in the modern world today. And those benefits are hard to wish away.
Of course, there are many ways that are being tried right now to address the problems with fiat systems including the use of money-transfer APIs, central-bank digital currencies and cryptocurrencies and all. Good.
If, on the other hand, you like cryptocurrencies, here are the top ten practical use cases of them in plain simple language. The usability of cryptocurrencies becomes clear when you put the current problems with financial systems into a clearer perspective.
1. Low-cost cross-border transfers and transactions
The total global remittance flow is $540 billion annually and whether this is agreed on or not, the various main/dominant/legacy forms of international payments currently involve multiple intermediaries and hence the high costs of cross-border transfers. Cryptocurrencies may not be a perfect solution for this problem but they deliver several advantages here, one of which is lowering the cost by facilitating peer-to-peer transactions.
For instance, most cross-border banking transactions take up to three business days including transfer via Automated Clearing Houses. The process usually involves different parties and without doubt, fees accumulate at each step of the process, including transfers from the sender’s bank to the national correspondent bank, from one correspondent bank to another, and foreign exchange fees.
For low volume transactions, you could pay up to 10 percent in costs and 2 to 3 percent for high volume transactions in legacy systems. Further charges apply from recipients. Crypto payments can only be made for a fraction of the average fees in these legacy systems, especially for low volume transactions.
Obviously, the issue of cost will vary from one bank to another as does the period the transaction takes. Other than this, you can use cryptocurrencies to transfer money to and from areas where you may not legally be able to do so using fiat.
Although users still incur external fees when they engage third-party services such as wallet services, the final costs are low compared to charges related to legacy systems. And innovation continues so more opportunities of lowering costs on these types of transactions are on the way.
2. Immediate settlement for transactions
Combine blockchain and cryptocurrencies and you get the benefits of the immediate settlement, whether you are talking about buying a property or making some payments. Cryptocurrencies allow you to avoid all the delays associated with the purchasing process.
You can also use smart contracts to automate processes, add or remove third parties as wished, or have transactions complete at a future date. Further, cryptocurrencies deliver high speed of transaction in an almost immediate and simpler manner.
If you are using Bitcoin, for instance, it is still possible to buy instantly and make an instant payment while still avoiding all the delays in the settlement processes when buying property, for instance. It happens on a peer-to-peer basis without middlemen.
The peer-to-peer mechanism is especially notable for improving international trade where it was expensive and took long to purchase property for instance. These kinds of transactions are cheaper given that cryptocurrencies overcome such barriers as exchange rates, interest rates, transactions charges, or other levies imposed by a specific country.
Blockchain not only helps avoid the expensive and manual processes and paperwork but also to ensure that transactions are recorded immutably.
3. Quick and easier payments
Ideally, all you would need is the address of the wallet of the person or enterprise and the amount will be credited to the receiver within a few seconds to a few minutes depending on the crypto.
Tracking payments and other transactions while in transit within the three days on legacy banking systems, for instance, can be tricky if not entirely impossible for a customer. You might need to keep checking with the bank, calling, etc. This creates huge uncertainty about delivery timing and the payment amount. In fact, it can be more difficult to track payments when problems such as incorrect account numbers arise.
Cryptocurrencies deliver the benefit of being able to track your payments on a second-by-second basis including knowing the exact costs and delivery times. One you avoid the delays, you can track the transaction to completion with more certainty.
5. Access: banking the unbanked
More than 2 billion people around the world have access to mobile phones or the internet but do not have access to traditional exchange services. Again, in addition to cryptocurrencies (being digital money) aligning with another tech (such as smartphones) use they would help solve the several challenges that prevent many people from having a bank account in various locations today depending on where you are.
For instance, in many places, people still lack nearby branches or a safe way to travel to them. Others lack the necessary ID, cannot afford the costs, and aren’t aware of the benefits or are prevented by conflicts.
So according to a World Bank report from 2014, this amounts to 14% in the low-income parts of the Middle East and 34% in Sub-Saharan Africa not having a bank account. Not cryptocurrencies alone can solve the problem because mobile money accounts are also solving this problem, but they can help greatly given their advantages.
Today with a smartphone or laptop and an internet connection, you can not only send or receive cryptocurrencies but also the barriers of entry are very low compared to banking solutions providing mobile platforms. Plus platforms such as Wirex have solutions for deposits, setting up standing orders, debit cards and more.
Together with the unbanked, the underbanked (or people who do not have adequate access to the financial services that banks can provide) form a large market not well served to date especially with large banks' encroachment of and into microfinancing business in the recent past.
Today, there are varied blockchain applications that will help solve problems of the high cost of transactions as well as high interest charged on loans, high credit score requirements, and poor access to loan, etc, all of which combine to discourage the unbanked and underbanked. You still get better access to credit with your digital assets even if your low credit score doesn't help much in a bank.
Moving forward, there are different technologies that will also help users to transfer digital assets across eWallet payment networks at a fraction of fees.
Blockchain delivers more safety and security for money and assets in the digital form with its defined financial rules and a clear process for verifying transactions. That's exactly why many banks are adopting the technology. Cryptocurrencies are thus more secure because they use this technology.
Cryptocurrencies use NSA created cryptography.
7. Greater trade accuracy and shorter settlement process
8. Exchange and tokenize anything to facilitate asset transfer
Including money, content, property, and shares can all be tokenized and traded user-to-user directly, digitally, as you wish. Even those things that are hard to attach monetary value in units, cryptocurrencies can be used to tokenize them. Commercial transactions and agreements are conducted automatically without the need for a middleman, as the smart contract enforces the obligations of all involved parties. Besides, cryptocurrencies are re-innovating the selling of property and fundraising for capital where different people can buy the tokenized property or service and raise the fund for the seller needs.
Using the blockchain as a “large property rights database," it not only helps to transfer assets but also specialist modes and also skills.
9. Avoiding fraud and trust issues
Cryptocurrency transactions cannot be counterfeited or reversed arbitrarily by the sender like happens with credit card chargebacks. Chargebacks on credit cards increase the chances of fraud. Again, centralized monetary systems are prone to manipulation in their dependency on the need to trust a person or individual to have their value remain.
Cryptocurrencies are hosted on a decentralized technology and different people participate to determine their value.
Blockchain delivers the advantages of pseudonymity -- or complete anonymity (whatever you get is much better in crypto right now) -- and you will not need to share your identity or whereabouts or the details of the transactions made between you and the beneficiary if privacy is your top priority. However, different coins have different levels of anonymity and some perform better than others.
11. Plus you can avoid identity theft
The centralization problem is huge and your sensitive data shared can be compromised. Cryptocurrencies help protect online identity with its secure cryptography and the fact that everyone gets to keep their information in decentralized storage and choose what to share and who to share it with.
12. Greater financial freedom
Cryptocurrencies, through a distributed ledger technology, enables people to transact and trade at any time of the day regardless of whether it is on holiday or not when banks shut down and are not accessible. It also provides greater financial freedom and independence in places where government entities control banks and financial institutions to limit access to capital unfairly.