The concept of cryptocurrencies have been prevalent for a while, and it has grown from being barely known or accepted by investors to now being widely acknowledged around the world.
However, there are still those who are unaware of the unlimited potentials of these digital assets. Virtual currencies are on its way to take over the global economy, and soon we will all be living in a world where tangible currencies no longer subside.
When I mention the significance of cryptocurrencies in the current global economy, you might wonder why cryptos are gaining such attention.
The Idea Behind e Payments
The volume of Internet-based retail consumer transactions (E-commerce) has been continuously rising in recent years, with an increasing number of consumers buying goods and services online.
While E-commerce has drastically transformed the way in which consumers associate with traders it has not, yet, had as radical an impact on the actual payment means or channels for the final compensation of retail commercial transactions.
These continue to be paid mostly through conventional means and, in particular, by bank transfers/direct debits and credit or debit cards.
This is despite the parallel evolution of a single operator online payment platforms, mobile and contactless payments, which valued for a smaller, but rising, the share of the market for retail payments.
Technology-enabled financial advancements hold the promise to transform the processing and remuneration of retail payments in at least three distinct ways.
The first is through the potential replacement of traditional means of payment by virtual currencies (VCs) and cryptocurrencies, such as bitcoin.
The second is by trailing the processing of payments through decentralized platforms, so-called ‘distributed ledgers, renewed real-time, without any kind of involvement of trusted third party intermediaries.
And the third is by automating the working and settlement of payment transactions through recourse to known as ‘smart contracts,’ written on distributed, digital platforms.
Nevertheless, before we get deep down to the effects cryptocurrencies are bringing about in our economy, let us understand what they are in general.
So, what are cryptocurrencies?
The best way to explain that is by highlighting their concept. Cryptocurrencies put forth a platform where decentralized security could be formed, and we no longer need to be at the aid of centralized ledgers that impose charges arbitrarily for the mere transferal of funds.
Since their origin, virtual currencies have been gradually winning attention, and more and more coins began surfacing.
Before you dive into why cryptocurrency is essential for marketing, you need to understand what it is in the first place.
A cryptocurrency is a form of blockchain technology, the kind of technology that bitcoin and other distributed ledger systems are based on.
A large ledger of transactions, blockchain is an open and shared database that works in a decentralized network format. It enables users to transfer and add information to it anonymously, without security agreements.
In other words, cryptocurrency, like Bitcoin, is an anonymous financial arrangement that employs blockchain technology to run. Instead of using a credit card to pay for an item online, users can use Bitcoin or any other form of cryptocurrency. And it’s getting pretty popular.
The most exciting advantage, or the most well-known advantage, is their decentralized nature. That means that no central authorization or bank can have control over them. There are also no barriers or borders that can influence them.
Significance Of Cryptocurrencies
Making payments in foreign countries can become a hassle with regular currencies. It takes added time and high fees are often applied. That’s not to say that crypto payments come free of charge, but they can be done from point A to point B, doesn’t matter where they are, in merely a few seconds.
Think about it like this – online payments are trades made among two parties. The thing is, when we’re speaking of the current online payment systems, there are not just two parties that are included.
When you apply your card to make a payment online, you start a whole process that eventually ends with the end recipient receiving your money. You authorize the merchant to get a certain amount from your bank account.
Yet, several parties are involved in this transaction. First, there is the merchant, then their IT provider, probably another third party processor, the card network itself and also your bank who provides the card.
All the players here have access to your account throughout the transaction. Any kind of scam could happen, particularly in international transactions where the number of parties involved grows bigger.
However, keep in mind that even though online card payments have their drawbacks, they do present a safe way to go. The only significance here is that, cryptocurrencies put forward an even more stable way to pay.
Cryptocurrencies and ePayments
Electronic Money and cryptocurrencies are two methods for making payments that are digital in character. Both are synergists in the digitalised payment cycle.
Nevertheless, the advantages of cryptocurrencies always stand out.
The biggest advantage comes from the point that these currencies, by their nature, are secure and are easy to transfer.
Today countries like India are trying to regulate the cash market and to move the country toward digitalization. But while the efforts are remarkable, the fact is that digitization still remains to be totally dependent on cell-phones and mobile wallets associated with them.
These days, digitization in India is being pushed through POS machines or ePayments. Although the cost of transactions for ePayments is coming down the disturbing fact is that there are mediators involved in internet payment.
These mediators, which are usually banks, act as third parties and append to the cost of the transaction. POS terminals are also costly for many traders.
So can these small merchants use cryptocurrencies at a cheaper cost and resolve the problem of connectivity or digitization?
The answer is yes. As long as data stays cheaper on the mobile phone, cryptocurrencies can be used to do transactions even with small merchants.
Digital cash has a big variation when it comes to the methods used in its operation when compared to cryptocurrencies. Fraud or deception in cryptocurrencies is very rare since the process is reliable and very safe for the transaction.
However, Cryptocurrencies too have issues. One main drawback is that bitcoin blockchain can process only about 5 to 7 transactions per second while current digital payment system like VISA cards can handle up to 2000 deals in a second.
Many developments are being carried out to solve the scalability issues for the Cryptocurrencies.
Which takes us to the recent developments going on in the app development industry incorporating cryptocurrencies
Cryptocurrencies and Mobile App Development
Cryptocurrency is enticing, but does the possibility of quick settlements, lower fees, and decentralization surpass the challenges of developing and maintaining apps that rely on distributed databases?
The first step in this discussion would be to understand what crypto means from a technological standpoint and recognize the business applications for developers.
The technology underlying cryptocurrencies—blockchain— it refers to a distributed database composed of data blocks that include a timestamp and link to the preceding block, making it an excellent technology on which to create and run an anonymous, P2P system for transactions and currency exchange.
Cryptocurrency is digital, so random reversals or chargebacks are mostly eliminated. The remuneration is carried out in real time, and there are no 3rd parties between developer and buyer, so fees are cheaper.
Whereas, credit cards work by the customer ‘pulling’ data, with crypto the user decides to ‘push’ data, limiting transactional exchange to basic data access which means no personal information is exchanged.
Cryptocurrencies may be especially appealing to app developers in newly surfacing markets where one, most web-connected users are completely mobile-first and, two many consumers don’t have access to conventional financial institutions or exchanges.
In such markets, it is fair to assume that users who’ve leaped over desktop will adopt cryptocurrencies, which bypass legacy transactional systems, such as credit cards.
Crypto, for now, isn’t going to transform the mobile app industry. But the underlying technology like blockchain grants developers the potential to change how apps are created, distributed, and maintained.
We’re not yet there, but it’s still impossible to overlook the indications that cryptocurrencies have for the prospect of mobile app development.
Global Appeal of Cryptocurrencies
Cryptocurrencies offer an easy-to-use, digital alternative for fiat currencies. Users from the United States or the European Union may view cryptocurrencies for granted, but there are many countries with overlooked domestic currencies.
Cryptocurrencies can be used to bypass these capital controls and taxes—legal or not—which has directed to increased demand on the part of consumers and businesses.
The potential function of digital currencies and blockchain technology has become a frequent hot topic in e-commerce and the wider digital economy, with an increasing number of economic and government institutions funding in research and the expansion of blockchain solutions.
Cryptocurrencies have seen enhanced growth in market capitalization, price, and mainstream adoption.
This means they are rendering functions and features that are transforming the way things are being done. It’s not only a question as to whether they are influencing the economy but how and what the future hold for them.
It’s easy to ridicule this sudden rush, Yet, it’s an assuring fact that cryptocurrencies will significantly reshape the global economy.
Impact of cryptocurrencies on the economy
The global digital cash market is projected to grow at a consolidated annual growth rate of 14.1% within 2018 and 2023.
Consumer marketing behavior is evolving as digital payments provide consumers faster, safer and more suitable payment solutions, such as bank cards, net banking, e-wallets, and mobile in-store application.
The widening adoption of digital payment applications in various sectors, like retail, transport, entertainment and media, banking and monetary sector, help drive market growth. Additionally, the spreading popularity of smartphones and e-commerce inspires more technologically-driven payment methods and virtual currencies, such as Bitcoins. Glance Technologies Inc.
Impact of Cryptocurrency on the Financial Sector
The global economy mainly depends on the US Dollar. As the US Dollar is the reserve currency of the world’s monetary system, every single economic sector around the world depends on the US market. Hence, any alterations in the US financial markets always affects the world economic market.
However, with the rise of Bitcoin and other cryptocurrencies, the financial activities are getting decentralized. This is considered to change the dynamics of foreign relations, international trade, and diplomacy significantly.
The ecosystem of the international financial transfer transactions and the mainstream economic context basically requires entities such as banks, clearing houses, and Swift. This means no global transfer of money can happen without the SWIFT network.
Thankfully, with the advent of cryptocurrencies, this is no longer required. By cutting out the middlemen, cryptocurrencies are causing a huge influence on the global payment How? Let’s take Bitcoin as an example. Doing a Bitcoin transaction is very similar to exchanging cash with someone. Just sending someone a sum of money.
It does not need several intermediary parties and does not create a billing sequence. It’s just a simple step where you just have to trust your payment provider.
Also, Bitcoins can’t be counterfeited or hacked (because of blockchain). Every transaction that occurs is placed on a list, and every client has a copy of the history.
That means that you can’t forge Bitcoins. Double spending is also not possible due to the nature of the blockchain.
The whole purpose behind adopting new means of payments is making it simpler for people to shop online; for e-commerce businesses to reach more customers. Cryptocurrencies help accomplish this goal because they have no barriers or borders.
I will point out that it will take time for more and more people to practice cryptocurrencies to this end. They also have some downsides, but they are a legitimate option for digital transactions.