One of the common questions in the crypto industry is how can cryptocurrencies — and crypto payments, in particular — impact the economy? Will their impact be a positive contribution, or a negative one, which will only cause damage?
This is the topic that we will discuss today. First, however, we recommend you check out our article on what cryptocurrencies are, simply so that everything about them would be clear before we explain crypto’s role in the modern economy.
The problem of money management in modern day
As you probably know, the modern economy is dominated by middlemen. This includes everything, from the banks, financial institutions and services, all the way to credit card companies such as VISA, Mastercard, and alike.
These companies and institutions have gathered huge amounts of influence in the financial world due to the fact that they move all of our money. However, they don’t just do it for free — they charge large fees for each transaction, which is why companies have to increase the prices of their products and services.
Not to mention the large control over this money, as central banks get to release new funds into circulation. In fact, the banks’ mismanagement of our money was what led to the financial crisis in the mid-2000s, and eventually, to the very creation of cryptocurrencies.
As we have explained in our other articles, this problem was what inspired Satoshi Nakamoto to explore the old concepts of digital money and create Bitcoin, which saw the daylight in the first days of 2009.
Since then, countless other cryptocurrencies have emerged, and have been taking over the world ever since.
How can cryptocurrencies help?
As stated, all of the big banks and credit card companies hold power over our money and charge giant fees for managing it and moving it. This is what cryptocurrencies aim to change. In essence, the cryptocurrency payments can allow us to free ourselves of the middlemen, meaning that we will not have to depend on Mastercard, VISA, and other similar institutions for our money management.
You would be the sole owner and manager of your digital currencies. You would keep them in your own wallet, exchange them for other coins in various exchanges, and use them for purchasing goods and services directly.
And, since there will be no middle man to take parts of your money for themselves, the fees would be minimal. In most cases, you would only have to pay a small fee for sending any payment.
However, the point is that neither products nor services available to you online or offline would be as expensive as they are now. With the fees eliminated, merchants would be able to lower the prices, and you wouldn’t have to pay extra to some third party just so that the appropriate amount would exchange hands.
Naturally, with the items and services being cheaper, and you keeping more money for yourself — you would also be able to buy more products, or pay for other services as well. In other words, the reduction of fees would lead to the reduction of prices, which would, in turn, lead to increased spending.
That very fact would allow the global economy to surge drastically, simply by changing one little aspect of the whole process — large fees. A lot of these companies and banks have made fortunes on the fact that someone needed to manage the money of the masses in a safe, secure way. They used the opportunity to establish themselves as an irreplaceable part of the system.
But, as soon as blockchain technology and cryptocurrencies emerged, the world has changed, and their existence became endangered. This is one of the bigger reasons why these institutions are so skeptical of cryptocurrencies, and often openly opposed to them. They are aware that their survival depends on our dependency on them, and if that is eliminated, no one would ever go to a bank again, and with good reason.
Meanwhile, the economy would become much healthier, and businesses around the world would explode due to the greater demand for goods and services. Simply by having more money, people would continue to buy more, as they always do.
What challenges do cryptos have to face?
Of course, there are still plenty of challenges to be overcome along the way. Cryptocurrencies still require greater exposure, so that the world would become aware of them, and learn more about them. Meanwhile, their technology still needs improvement, as well as a simplification. The only way to attract a greater number of people would be for cryptocurrencies to become easier to use.
Then, there are regulatory problems, and regulators still cannot find a proper way to regulate digital currencies. Partially, this is due to the fact that they are still relatively new, unknown technology. Another big reason is the fact that crypto and blockchain technologies are still evolving and changing. The crypto market sees breakthroughs almost on a daily basis, and each new project brings something new to the table.
Once their technology matures and they stabilize, the regulators will be able to find common ground across numerous jurisdictions around the world, and cryptocurrency will finally be regulated. The next step would be mass adoption by businesses and individuals alike, which would lead to greater use cases, increased use, and eventually — the increase in the economy of the world, as described above.
Of course, that sounds like a long way to go, and it is, but developers and new technologies have been traveling down that road together for over a decade now, and cryptos have never been more advanced or more popular than they are today. That will only continue to improve in years to come, meaning that it is not their price that matters — it is how advanced they are, what you can do with them, and how good their underlying tech is.