Advantages of Cryptocurrency

Built-In Scarcity May Support Value

Most cryptocurrencies are hardwired for scarcity – the source code specifies how many units can ever exist. In this way, cryptocurrencies are more like precious metals than fiat currencies. Like precious metals, they may offer inflation protection unavailable to fiat currency users.

Self-Interested, Self-Policing Communities

Cryptomining is a built-in quality control and policing mechanism for cryptocurrencies. Because they’re paid for their efforts, cryptominers have a financial stake in keeping accurate, up-to-date transaction records thereby securing the integrity of the system and the value of the currency

Robust Privacy Protections

Privacy and anonymity were chief concerns for early cryptocurrency proponents, and remain so today. Many cryptocurrency users employ pseudonyms unconnected to any information, accounts, or stored data that could identify them. Though it’s possible for sophisticated community members to deduce users’ identities, newer cryptocurrencies (post-Bitcoin) have additional protections that make it much more difficult.

Difficult for Governments to Exact Financial Retribution

When citizens in repressive countries run afoul of their governments, said governments can easily freeze or seize their domestic bank accounts, or reverse transactions made in local currency. That’s not possible with cryptocurrencies, whose decentralized nature – funds and transaction records are stored in numerous locations around the world – effectively prevents state seizure.

No Third-Party Processing Fees

The concepts of block keys, private keys, and wallets effectively solve the double-spending problem, ensuring that new cryptocurrencies aren’t abused by tech-savvy criminals capable of duplicating digital funds. Cryptocurrencies’ security features also eliminate the need for a third-party payment processor – such as Visa or PayPal – to authenticate and verify every electronic financial transaction. In turn, this eliminates the need for mandatory transaction fees to support those payment processors’ work – since miners, the cryptocurrency equivalent of payment processors, earn new currency units for their work in addition to optional transaction fees.

Lower International Transaction Costs

Cryptocurrencies don’t treat international transactions any differently than domestic transactions. Transactions are either free or come with a nominal transaction fee, no matter where the sender and recipient are located. This is a huge advantage relative to international transactions involving fiat currency, which almost always have some special fees that don’t apply to domestic transactions – such as international credit card or ATM fees. And direct international money transfers can be very expensive, with fees sometimes exceeding 10% or 15% of the transferred amount.