What contributes to the growth of trust in cryptocurrency?
Remember ten years ago when cryptocurrency was in the public consciousness. Ten years ago, people who had heard about digital currency associated it with criminal activity. Today, on the contrary, it is a legitimate, profitable, and very popular asset class in which governments, corporate giants, and financial institutions invest.
Bitcoin cryptocurrency price conditions hit the headlines every day, the average investor no longer asks, “What is blockchain cryptocurrency?” Instead, they are exploring how to use digital resources as a means of using them.
In this article, we’ll take a look at what held back cryptocurrencies for so long and then led to a rapid and seemingly irreversible change in public confidence in cryptocurrencies.
Is cryptocurrency a criminal currency?
Even today, some people believe that digital currency is only used to commit crimes. Although this is far from the truth, certain blockchain characteristics make digital assets attractive to criminals, for example, anonymity and bounded regulatory oversight in the cryptocurrency space.
Cryptocurrency crime has made lurid headlines, but here are a few real facts:
- According to the 2021 Crypto Crime Report, the number of crimes related to cryptocurrency has decreased dramatically over the past year alone. In 2019, cryptocurrency crimes accounted for 2.1% of all cryptocurrency transfers (about $ 21.4 billion), and in 2020 this figure dropped to 0.34% of the volume of transactions (about $ 10 billion lost as a result of cryptocurrency cybercrimes and fraud). Compare this with the fact that from 1 to 2 trillion dollars are laundered in fiat currency every year.
- It should also be noted that the situation is improving every day, as global financial regulatory authorities and governments of individual countries begin to take measures, pay attention and adopt legislation in the field of cryptocurrencies, striving to keep up with the rapid development of this exciting new asset class. In addition, cryptocurrency service providers are getting better at plugging holes in their systems and taking security measures to protect against cryptocurrency cybercrimes.
- In addition, exchanges such as Binance, for example, have already created reserve funds to cover any assets lost as a result of a cyberattack.
A new world of cryptocurrency owners
Almost 2 billion people around the world currently do not have bank loans, which means that due to living in rural areas without the necessary infrastructure, having a criminal record or lack of documents, they do not have access to financial services. In developing countries, in particular, this can create serious problems for small businesses in remote areas without local banking facilities, which may need to make cross-border payments. This is where a decentralized blockchain-based P2P network can provide real help by democratizing financial ecosystems, and this is just one of the areas in which we are seeing an increase in trust in cryptocurrencies.
Trust and confidence through institutional investment
Without a doubt, the cryptocurrency market is gaining momentum at an incredible pace, and part of the reason for the rise in popularity of cryptocurrencies is the impact of the global pandemic, which has destroyed the economies of different countries, weakening fiat currencies and sending investors in search of alternatives.
Institutional cryptocurrency investment has skyrocketed in recent years, with financial institutions and corporations that used to run a mile away from cryptocurrencies are now investing heavily in digital assets.
For example, the Grayscale Bitcoin Trust, owned by investment company Greyscale, now owns 2% of Bitcoin’s working capital. At the corporate level, Tesla and Square buy millions in Bitcoin, and Paypal supports crypto payments.
Trust in cryptocurrency exchanges: Notable success
The legitimacy and popularity of cryptocurrencies is partly based on the hype surrounding market successes, which grab the attention of the general public, generating huge profits for the participants. For example:
INITIAL PUBLIC OFFERING (IPO) COINBASE
Coinbase, the largest centralized cryptocurrency exchange in the world that IPO on April 14, 2021, started trading at $ 381. The fact that traditional investors were willing to jump into the game at this level is one of the strongest signs that cryptocurrencies are now becoming mainstream. Coinbase, a cryptocurrency trader, has earned a $ 85.7 billion valuation, setting a new standard in the cryptocurrency arena.
KRAKEN FINANCIAL
Late last year, Kraken, a centralized cryptocurrency exchange platform, received a US banking license, becoming the first cryptocurrency company to be allowed to offer crypto products and services alongside traditional banking services.
DeFi and CeFi
The past year has seen drastic measures taken to stave off a global financial collapse: negative interest rates, huge stimulus packages and overgrown stock markets have forced many to turn to digital assets as traditional institutions lose some degree of public trust.
While centralized finance (CeFi) requires trust on the part of the account holder, decentralized finance (DeFi) offers a trustless environment without intermediaries.
Many believe that when the two merge and the CeFi institutions embrace blockchain technology, we will get the best of both worlds. This can already be seen with the growth in the number of cryptocurrency debit cards, making it easier than ever to use cryptocurrencies for day-to-day financial transactions.
Increased legitimacy through the implementation of CBDCs
Central banks around the world are moving forward with steps to create their own cryptocurrencies. Central Bank Digital Currencies (CBDCs) show how serious governments are about blockchain technology.
This has led to important high-level discussions about the regulation of digital assets and government-issued cryptocurrencies, which are vital for blockchain to become widespread.
Cryptocurrency progress and development in Ethereum 2.0
Scaling tier solutions are in the spotlight in an effort to bring cryptocurrencies to the mainstream. If the blockchain world wants to meet the needs of billions of potential users, it needs to scale.
Ethereum 2.0 emerged as a result of network congestion due to the low number of transactions per second (TPS) that could still be processed.
Through a series of updates and steps, such as switching to the Proof of Stake consensus algorithm and blockchain sharding, Ethereum 2.0 aims to increase performance from roughly 25 TPS to 100,000 TPS.
NFT’s: A new type of digital assets
If you have not heard about non-functioning tokens (NFTs), then you have probably lived under a rock for the last year. NFT is a type of digital asset represented by a code recorded on the blockchain like jpeg or a video.
Ownership and reality can be tracked and NFT can be sold or bought like any physical work of art. The most famous NFT to date is the purchase of the Beeple’s “Everydays: The First 5000 Days”, which sold for $ 69 million!
Those who find it difficult to understand the intrinsic value of virtual assets, and even some cryptocurrency enthusiasts, consider this a bloated bubble that is about to burst.
However, so many analysts argue that while not all NFT’s will survive, some will emerge from the crisis stronger than ever.
NTFs have opened up a whole new market for the blockchain world, and digital art has served as a test case for how technology can be used in everyday life, beyond just cryptocurrency.
Trust in a blockchain system with countless applications
In addition to NTFs, blockchain technology is used in a wide variety of areas, in addition to finance: healthcare, gaming, insurance, and others.
By keeping a record of all transactions and functioning in a distributed manner, blockchain can help businesses increase speed and efficiency. It can keep your data and personal information safe and reduce costs by getting rid of middlemen.
The growing confidence in cryptocurrencies is generating intense competition, which is a good thing as it stimulates innovation, enabling progress towards more intuitive and cost-effective blockchain-based products and services in every area of life.
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For more information on crypto arbitration, as well as a variety of topics related to cryptocurrencies and blockchain, visit the Intelfin blog.