Why Do People Buy Cryptocurrencies
According to Chohan(2017)
At its simplest, a cryptocurrency can be thought of as a digital asset that is constructed to function as a medium of exchange, premised on the technology of cryptography, to secure the transactional flow, as well as to control the creation of additional units of the currency.
As of October 2019, the most expensive cryptocurrencies worldwide were Bitcoin, Maker, Bitcoin Cash, and Ethereum. Bitcoin continued to exceed other currencies, with one coin valued at 8,266.63 U.S. dollars. Market Capitalisation of cryptocurrencies crossed $250 Billion this year and some experts believe it can reach as high as $2 trillion by 2030.
Why People Buy Cryptocurrencies?
Cryptocurrency is decentralized cash, which acts as a medium of exchange of digital information.
In this article, we'll be analysing the aspects that make it a workable alternative for financial trade.
Decentralization: Most of the cryptocurrencies have no central authority to control; the network is distributed to all participants; each computer mining node is a member of this system.
The technology responsible to manage the database and jointly keeps a record of cryptocurrencies transactions is blockchain technology.
It is because of the afore-mentioned parameters that is driving people to buy more cryptocurrencies. As per the forecasts Bitcoin is expected to repeat its highest value in the year 2020.
Strong Security: It is considered difficult to make a false payment on cryptographic transactions.
Once the transaction has been authorized, it can't be reversed. The charge-back transaction, which is a refund of payment to consumers, is the only option left in such a case.
On the other hand, decentralization can cause weak security as non of the central authority of any country is involved in any of its transactions. In Cryptocurrencies, every transaction is recorded in the blockchain.
All in all, we can say that Cryptocurrency is safe because of technologies like blockchain and cryptography even though it is not authorized by any central body, it maintains a record of every transaction.
Easy & Low Operational cost: Since the Cryptocurrency has nothing to do with the exchange rates, interest rates, transaction charges, or other charges of any country, therefore, it can be operated universally. One doesn't need to pay any extra charges to any external body(bank/government) for any transaction related to cryptographic currency.
In such cases, one needs to create their wallet and use it accordingly without any restrictions using the internet, making it accessible to everyone. This makes it trendy and enhances competition level.
Transactions are sent between peers using wallets. The person creating the transaction uses the wallet software to transfer balances from one account to another.
Transactions are then recorded on the blockchain. Since it also involves unlimited online transactions, it becomes easy for everyone to operate.
Artificial Supply Limit: Most cryptocurrencies follow the monetary policy of keeping a limited Supply. Coins are limited to use and mine.
This keeps inflation in check and also attracts a lot of investors as the idea of having a limit gives a notion that prices will always go higher in the long run. Unlike Bitcoins, national currencies like US Dollars do not have a limited supply and are prone to inflation or decrease in its purchasing power, i.e. the value of 1 dollar, in real terms, decreases with time.
As of 2019, Ethereum does not have a limit in the supply of its coins. It's distribution crossed 100 million coins in circulation this year. However, there are talks of it introducing a limit of 120 million coins in the future to decrease inflation.