Since 2009, Bitcoin’s market value has grown to close on $540 billion (as of this writing) out of a total of over $1 trillion in cryptocurrency market capitalization. Bitcoin has spurred the development of digital economies and the adoption of decentralized payment ecosystems.
Here are some of the factors that have precipitated the embrace of these digital currencies:
Fiat currency payments and transfers traditionally face problems like unnecessary bank charges, long settlement periods and lost value in the exchange process. Although not without their own issues, cryptocurrencies like Bitcoin have addressed many of the payment-related issues facing traditional financial institutions.
One of the key tenets underpinning Bitcoin–and blockchain at large–is trust. Satoshi Nakamoto’s 2008 whitepaper, "A Peer-to-Peer Electronic Cash System," gave the first description of blockchain. It showed that once a transaction is verified by blockchain, it becomes immutable and no longer changeable. The transparency of the blockchain adds a key element of trust to crypto-based transactions.
Ease of use
Thanks to peer-to-peer payments without the need for clearing houses, cryptocurrencies are proving to be a convenient alternative to traditional banking solutions. Bitcoin is already making an impact in some developing countries, where remittance inflows from the diaspora are big. With the uptake in remote jobs and the growth of the gig economy, cryptocurrencies also help to facilitate easy payments without the need to go through banks.
High inflation in some economies has been a driving factor for many seeking to preserve their capital. Given that many cryptocurrencies–particularly those such as Bitcoin–are deflationary in nature, users in these countries embrace these digital currencies as a hedge against inflation. Cryptocurrencies also play a role in economies where there is no structured financial system that is capable of handling complex, multilayered financial issues.
The blockchain is secured by cryptography, which helps prevent counterfeiting or double-spend. These encryption protocols are based on complex mathematical algorithms, which are used to verify transactions. It also provides a level of safety by preventing hackers from producing fraudulent transaction records. Although there have been reported cases of hacks on blockchain-based projects, these have mainly been a result of vulnerabilities in protocols and bad actors.