The traditional way of payments that involves either paying in cash or sending money using bank accounts (NEFT, etc.) is good, but there are limitations. Cryptocurrencies, also commonly referred to as digital money, are a much better option. Let’s try to understand why.
The biggest drawback of the traditional finance system is that it is controlled by centralized entities such as banks. If you want to make a transaction such as a payment or money transfer, you need your bank to approve the transaction. In other words, you are dependent on your bank and must share personal details as well as transaction information with them. Also, this kind of system is not very secure, as there is only one point of failure, which can lead to the failure of the entire system.
Cryptocurrencies are a better way of payments in almost every way. They are highly secure, globally accessible and based on a decentralized system called the blockchain.
In order to understand the benefits & significance of cryptocurrencies as a means for payments, one must have a basic idea of blockchain, the technology behind cryptocurrencies. For the purpose of this article, we will take the example of the Libra Coin, which is a fast-growing digital currency of our time.
Libra Coin - A Stronger, More Secure Means for Monetary Transactions
Cryptocurrencies are electronic currencies that are operated via a computer code and managed through blockchain. Blockchain is a decentralized network where several distributed computers (called nodes) are interconnected and are responsible for keeping the network secure and sustained. Nodes are responsible for verifying the transactions passing through the blockchain and securely storing them on a public ledger such that it’s easy to verify in case of a dispute.
The biggest advantage of cryptocurrencies over traditional/fiat currencies is that digital currencies are not controlled by banks or any other centralized entities. A person is the true owner of his/her cryptocurrencies and can spend them however they want and whenever they want. Also, they need not share their personal information in order to make a payment with cryptocurrencies.
The Libra Coin, for instance, is a digital currency made for e-commerce systems. It aims to make e-commerce transactions more secure, convenient & affordable.
Also, payments with the Libra Coin are affordable compared to traditional payments, since the transaction fee is lower because of the lack of a middleman.
The basic idea of digital currencies is that transactions such as payments could be facilitated without a third-party like the bank or a broker. This will not just reduce the probability of human errors but also will increase security and reduce the transaction cost. Instead of a middleman, crypto networks (blockchains) use a computer program called Smart Contracts that contains the code to automatically verify and process the transaction.
The Libra blockchain and smart contracts, for instance, have possible applications in a range of industries such as e-commerce, data security, privacy, digital payments, identity protection, and others.
Here are some other reasons why Libra Coin is a much better way of making payments when compared to fiat currencies.
Privacy protection - Blockchain technology uses cryptography methods to encrypt & protect the transactions and user data on the network. Also, users need not share their personal details with anyone when using the Libra Coin.
Free of intermediaries - Unlike fiat payments that are controlled by banks, Libra Coin payments are truly decentralized and, therefore, not controlled by middlemen. The benefits are faster transactions at a low cost.
Global Accessibility - One of the top reasons why everyone, not just e-commerce portals, must use the Libra coin is that it’s a global payment system that can be accessed & used by just anyone, anywhere in the world. You only need a digital wallet and a working internet connection to send/receive money using cryptocurrencies.
Other than that, crypto payments are highly secure and have little chances of fraud or errors that are common with physical payments.
If you are looking for a better way of payments than cash or bank transfer, do check out the Libra Coin white paper to know how cryptocurrencies are disrupting the digital payment industry.