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Cryptocurrencies are a decentralized form of digital asset, meaning they can exist independent from any central authority. They are a new form of digital money. This technology provides substantial financial freedom to its users around the world. The word “cryptocurrency” is like a glue terminology that glues together the concepts of encryption, blockchains, and transactional data.

A cryptocurrency is an emerging form of payment online. It really thrives on the changing digital landscape. With the advent of real-time interaction, businesses can thrive without depending so much on cash. Some call its creator ‘Satoshi Nakamoto’ but nothing else is known about him. The blockchain which leads cryptocurrency relies heavily on encryption methods (which determines who can spend it). Tokens are units of exchange used for items in video games that are recorded on ledgers inside the “cryptocurrency” system. The tokens and the ledgers are safeguarded with various forms of encryption, such as Private/Public keypairs.

Encryption is an important mechanism for ensuring secure payments online, and currencies built into video games use it to prevent cheating. Using cryptographic processing, professionals found a new form of digital currency to spend online. They named it cryptocurrencies, and it functions as secure money for transferring funds online (unhackable). CryptoToken is how you do this today. Cryptocurrency is stored in a digital wallet, but if something unexpected happens, you risk losing everything. For example, the platform may unexpectedly go out of business or you make a mistake and send currency to the wrong person; you lose the password because you forgot it, or your external hard drive fails.

Cryptocurrencies get a lot of flak for a number of reasons, including their use for illegal purposes, volatility of exchange rates, and vulnerabilities. However, they also deserve some major praise. People are quick to ridicule quickly fluctuating crypto valuations or illegal use, but there’s more to cryptocurrencies than that. The practical nature of cryptos is incredible; they’re easily transported and can be subdivided into tiny amounts when compared with their historical counterparts. New cryptocurrencies pop up like springtime flowers. As the market grows and changes, some currencies become stronger, but others fall to the wayside. CoinMarketCap.com, a website for cryptocurrency market research, tracks over 10,000 cryptocurrencies traded publicly today. Cryptocurrencies that exist online, e.g. Bitcoin or Litecoin. 

Cryptocurrency in Nigeria 

The well-known Central Bank banned all Nigerian financial institutions from trading in cryptocurrencies on the 5th of February 2021. It forbade financial institutions from engaging in the transaction of virtual currency and warned that those who didn’t stick to the rule would pay dearly. This was bad news for speculators; however, it was good news for traditional hard currency investors as bad currencies increasingly get devalued against strong national currencies.

Six use cases of Cryptocurrencies

Here are some of the most effective cryptos and their real-world applications:

  1. Bitcoins: The advantage of cryptocurrencies is that they are flexible, can be stored in wallets, and can be sent to anyone with the same infrastructure. Back in 2008, Bitcoin pioneered a new kind of currency. Many other cryptocurrencies have been created, either as clones or started from scratch. Altcoin, Dogecoin and Karma coins are popular examples today. These cryptocurrencies often offer different features and specifications as well as their own value proposition. At this point, the total value of cryptocurrencies is about $1.5 trillion. A majority of that value comes from Bitcoin alone. In other words, Bitcoin is king. Its market cap accounts for 60% of the total value in cryptocurrency, a $225 billion market. It has been around since 2009 and was introduced by Satoshi Nakamoto to change finance as we know it. Since cryptocurrencies were introduced, Bitcoin proponents have pushed them to be viewed as ‘stores of value’, which led to fierce competition with digital gold. For younger generations, bitcoin is a much more appealing store of value and concept than gold. Despite the outspoken volatility of bitcoin, institutions have been storing parts of their reserves in this cryptocurrency. 
  2. Programmable money: A smart contract is a type of decentralized system that permits the creation of new digital assets. The most popular use case is payment processing. Cryptocurrencies can be used to transfer funds between users with ease. This can be done through the use of wallets and exchanges that allow for frictionless transactions between currencies. Users can send payments to one another without having to go through a financial institution or centralized intermediaries like Paypal or Western Union. This means that the token holder can send money to any network without having to trust anyone else. Smart contracts can be programmed to perform certain tasks like sending money or making payments without human intervention. They are used to execute transactions between parties. The authenticity of a transaction is verified by writing a code in the blockchain. Smart contracts enable more efficient transactions between parties without requiring third-party intermediaries to be trusted. It is also known as the ERC20 token. A smart contract can also be used to generate documents like tax returns, agreements and other forms of documentation for businesses. Once recorded on the blockchain, these documents can never be deleted or modified. There are so many uses for smart contracts. It is important to note that smart contracts are not just limited ins scope to financial transactions. Additionally, they can also be used for legal purposes, such as registering a business name, creating a bank account, and other legal documents. Smart contracts are now used in everything from healthcare to real estate to government agencies. 
  3. Collectibles: Non-fungible tokens are unique digital assets. These assets may be worth more than their weight in gold, but they can still be used to play games. Collectibles in video games can consist of skins and characters, or digital land in virtual reality. This system allows players and assets to be traded without affecting the ownership of collectibles. Trading in cryptocurrencies offers the ability to easily purchase collectibles with no added fees or any other costs. For instance, anyone can buy a key from Overwatch on the OPSkins marketplace without needing to worry about credit card charges. Cryptocurrencies are a decentralized system, which means that no third parties will be needed for transactions or services, so this platform will be much more stable for online gaming collectors.
  4. Collateral: The blockchain network can be used to securely store, track and transfer collateral such as real estate titles, stock or bonds. It makes it possible to create more transparent transactions and contracts and secure the assets. Bitcoin is a form of collateral for loans and other financial transactions. If you are unable to repay your debts, the holder of the Bitcoin can take possession of it; 
  5. Identity: IDs such as passports and certificates issued by educational institutions, are often verified with a valid document. The blockchain can replace physical documents by storing the information on a decentralized database that is not controlled by any single entity. This lowers the risks of data breaches and falsification. Unlocking the tightest level of privacy in communication while being able to prove your identity to others, makes it possible for secure identification applications like voting or financial transactions. In some cases, two parties can use a private blockchain to create a trustless online collaboration platform.
  6. Fundraising: Cryptocurrencies can be used to raise funds from investors in the form of ICOs or through a Simple Agreement for Future Tokens (SAFT) contract which simplifies the process of investing in startups. Startups have the option of either accepting fiat or cryptocurrencies for their projects. ICOs are a form of crowdfunding where investors receive tokens in return for their investments. Often, the value of these tokens is determined by the success or failure of underlying projects.

Advantages of cryptocurrency 

Cryptocurrencies are a big deal with great potential. These new digital currencies make it easier to transfer funds directly between two parties without the need for a trusted third party. For example, bitcoins allow any person on the other end of the internet to directly send you $100 without paying extra fees or waiting days for a bank transaction processed. This is done through public keys and private keys in conjunction with versions of varying difficulty. Thus, with Bitcoins and other emerging altcoins, these transactions can be secured by public keys and private keys and governed by incentive systems such as Proof of Work or Proof of Stake.

Disadvantages of cryptocurrency

There is a lot of secrecy around cryptocurrency transactions. They are often used for shady, illegal activities such as deception and tax evasion. Cryptocurrency’s advocates value anonymity, encouraging whistleblowers to share information over the web or allowing activists in oppressive countries to communicate without being discovered by government officials. Some types of cryptocurrency are more private than others and this can help you stay anonymous when making online purchases. Some cryptocurrencies are private, but others offer no confidentiality at all. The more money someone has to hide, the more likely they are to use privacy coins. Of course, this can work both ways; criminals who deal in illegal goods or services might also be likely to appreciate the ability to remain undetected. However, Bitcoin isn’t the best vehicle for illegal activity. It’s not particularly anonymous, meaning transactions can be tracked over time. If a certain address is used to send tainted money, police can check the blockchain and use it as evidence in court. Definition 

Final thoughts 

Cryptocurrency has become a global phenomenon. This new technology is not only shaking up industries but stirring debates around fear and uncertainty. However, cryptocurrency’s ability to reach billions of unbanked people as well as its decentralised nature opens the door for social change and economic redistributions of wealth.

What are your thoughts on cryptocurrency? Let us know your thoughts in the comments below!

Amaka Odozi

Author Amaka Odozi

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