The value of top cryptocurrencies like Bitcoin and Ethereum has gone through the roof, crashed, and surged again. However, intense scrutiny by governments and regulators is keeping them in a tight spot. If this is not enough, the occasional hacking and heist turn the spotlight onto them. Despite all the criticism and loopholes, cryptocurrencies offer some unique benefits. In this post, we are going to discuss a few.
Money transfers across borders are difficult and expensive. However, cryptocurrencies can be easy and economical. The transactions are instant in many cases -- though Bitcoin transfers can take up to 10 minutes.
With crypto transfers, you don’t have to pay the high transaction fees that international money transfers involve. A recent Litecoin (LTC) transfer worth $99 million took just a few minutes and a transaction fee of $0.40. Some cryptocurrencies such as Litecoin (LTC) and Bitcoin cash (BCH) have used low transaction fees as their most defining feature.
One of the most talked-about use cases of blockchain, on which cryptocurrencies are based, is decentralized finance (DeFi).
Unlike traditional finance, where an intermediary is at the centre of all transactions, “DeFi aims to create an open-source, permissionless, participatory and transparent financial ecosystem that operates without any central authority,” according to a post on WazirX’s blog.
“The users always control ownership of their assets and interaction with the ecosystem happens through the peer-to-peer process and decentralized applications (DAPPs). DeFi smart contracts are publicly auditable and thus provide immense transparency,” the post adds.
For instance, WazirX is planning to launch a decentralized cryptocurrency exchange where transactions between peer-to-peer trades will take place based on smart contracts
The idea of cryptocurrency, a virtual coin, can be used to make your physical assets work as a currency. How? You can choose a blockchain network and list your physical asset such as a piece of real estate. You will have to upload other relevant information such as the ownership and the basic set of rules as in case of any Initial Coin Offering (ICO).
If the value of your asset is worth $10 million, you can issue 1 million tokens of $10 each. Crypto investors would buy your coins and you will be able to generate funds on behalf of your physical asset. It is the fractionalization of the physical asset that makes the value stored in it more liquid.
The same idea can be used to raise funds for your startup. For example, you have a great business idea and you want to raise some funds to get started. You can use the blockchain to list your business idea and issue an ICO, which is your own digital coin linked to your business.
Non-Fungible Tokens are digital assets such as a piece of art or a unique character in a game available exclusively on a blockchain network. They are not exactly cryptocurrencies but you can think of them as a derivative of cryptocurrency.
Art creators can use a blockchain network to store their works. The benefit includes the strong encryption technology that ensures no one can steal or copy them. They can sell the artworks on the network but anyone can trace the source and sequence of the purchases. As we said earlier, these works can also be tokenized.
The same idea works in gaming assets on the blockchain. Anyone who wants to use these assets will have to buy them from the creators. For example, crypto kitties, or virtual cats, is a game on the Ethereum network where players can buy, sell, breed, and collect these virtual cats created by the Canadian studio Dapper Labs. This is an early and popular example of NFT in gaming.
WazirX recently launched its NFT platform. Interestingly, this is the first one in India. On this platform, over 300 creators have put up their artwork.
Last but not the least, blockchain, the underlying technology that pins cryptocurrency, has several real-life applications, and it will not be long that it will become part of your life.
Here’s one use case: Land records in India and most parts of the world work on the principle of presumptive land-titling. In this, when you sign an agreement to purchase a property, the registration documents are mere records of the agreement, and your new claim to the land can be challenged in court.
As part of its land record digitization programme, the government is considering a conclusive land titling record system on a pilot basis, where once a land record is verified, its title will be guaranteed by the government. Experts have proposed putting this system on a blockchain where land transfers create verifiable, immutable entries on the distributed ledger, and you will be able to sell your land like how you sell a stock – within minutes – and without the buyer having to worry about the title or the success of the transfer.
(Edited by : Pradeep Suresh V)
First Published: IST