There has always been the need to come up with a global payment system that is convenient and cost-effective for all the users. Using the American dollar as the base currency when trading internationally had its shortcomings. For instance, currency exchange markets are very volatile. This means that the value of the dollar keeps changing all the time. As such, traders often lose a lot of money as they convert their home currencies to the American dollar to facilitate the exchange. This is the gap that bitcoins seek to fill. A bitcoin is an electronic form of payment that intends to revolutionize the financial industry. This article will explore 7 reasons why making payments in bitcoins is more convenient than paying using normal currencies.
1. Swift Global Payments
Bitcoins are transferable from one wallet to another within a few minutes. For you to send normal currencies, especially across borders, you have to fill out a lot of paper work. This process often takes days. Another challenge is that foreign currency exchange rates are dynamic. This means that the receiver often receives a smaller amount of money than the money that was sent. Of the world’s total population, about 4 billion people cannot access standard banking services, and this hampers their ability to make cash payments. Since bitcoins are internet-based, anyone is free to join. With just internet connection and a mobile phone or computer, one is able to make payments across the globe. Unlike banking institutions that operate a few hours a day, you can trade with bitcoins 24 hours a day, 7 days a week.
2. Very Cheap Transactions
It is very cheap to transfer this currency from one wallet to another. Some bitcoin exchanges charge about $5 per transaction. This is in contrast with banks that charge a fixed rate on the amount that you intend to transfer. Banks cost more because they have to pay their staff and meet other expenses which do not exist with bitcoins. Some banks make their clients pay annual account maintenance fees whereas a bitcoin wallet is free to open and operate. Once you download the wallet, you can store your digital currency for many years without having to pay anyone any fee.
3. Bitcoin Network Uses a Very Secure System
The bitcoin network is safer than any banking network in the world. Complex mathematical formulae and cryptography protect digital currencies. The use of cryptography eliminates any errors that might result from human activities. The banking system can be hacked and this often compromises on the client’s privacy. No one can successfully trick mathematics by manipulating the formulas that guide bitcoin operations. The bitcoin network is protected by millions of computers globally. Since the network is decentralized, no hacker can steal from the network. In fact, your bitcoin wallet is much safer as compared to your bank account. In case you lose your credit cards or ATMs, someone could use that information to steal your money. This never happens with bitcoins.
4. Anonymous But Transparent
Despite not revealing the trader’s details in a transaction, the network is very transparent. This is because all the transactions are traceable, public and are stored permanently in a public ledger. The network is anonymous because individual traders cannot be determined, but all the transactions can be traced. Anybody interested in confirming the transactions can do so by looking at the public ledger. You can choose whether you want your wallet to be publicly seen or not. You can easily see how bitcoins were exchanged, but you are not able to tell who the transacting parties were. Banks often require you personal details such as social security number, income, tax payments and identification details. If this information is not stored properly, it could be misused by other third parties.
5. Free From Inflation
All currencies are prone to inflation. One dollar was worth more in the last 10 years than what it is today. The value keeps decreasing due to more money being printed and the cost of living going up. The global inflation rates average 2%. This means that factoring in inflation at 2%, you lose more than 50% of your money every 35 years. This is not a good thing for long term investors. Since there is finite number of bitcoins to be created, it is not subject to inflation. Whereas the supply is fixed, the demand for this cryptocurrency will be increasing. This means that within the foreseeable future, the value of bitcoins will be very high.
6. Decentralized Network
The bitcoin network does not operate from one office or location. Rather, it is a global network of millions of computers, just like the internet. This decentralized nature means that bitcoins cannot be manipulated by any institution or authority. Central banks often vary interest rates and control the amount of notes in circulation in an economy. This means that your bitcoins cannot be rendered valueless or useless simply because of some legislation being passed. The decentralized nature allows people from different parts of the world to become part of it without any complexities. As long as you can access a computer and some internet connection, you are good to make payments using bitcoins. You do not have to have any form of physical identification or documentation.
7. No Reliance on Third Parties
With other payments systems such as PayPal or Skrill, it is the company that decides. The company has the power to deny or reverse a transfer. The two trading partners might not be involved when the company is making such decisions. In some countries, you will be made to pay taxes if your accounts have a lot of money. With normal currencies, you have to wait for the third party before you can trade. You must wait for banks to open before you can do your banking. With bitcoins, you do not have to rely on anyone. You can make payments at any day and time from wherever you are. If, for instance, bank employees decide to go on strike, banking services might not be accessible until the standoff is sorted out. Bitcoins can never be faced by such calamities due to decentralization.