Experts say that it's human nature to be fearful and suspicious of technologies that are unknown to the world. During their inception, cryptocurrencies faced some similar consequences. Initially, investors were quite certain that cryptos were only used for terror financing and conducting illegal practices. But eventually, it was cleared up that cryptocurrencies have several real-world implications; not just that, its underlying technology, blockchain, can be integrated into business models and used by distinct industries to efficiently conduct regular operations. But nevertheless, to date, there are many individuals who are skeptical about the influence of cryptocurrencies as a long-term investment asset and do not consider them relevant. Several of these critics consider cryptos as nothing more than scams or Ponzi schemes. Let's look at how cryptocurrencies work to consider why we should or should not label cryptocurrencies as scams.
The basis for the functioning of a cryptocurrency is its underlying technology blockchain. It is the way of storing information but without placing it in one particular place, it distributes the data among all the users of the system. In technical terms, it is a continuous successive chain of information blocks, which is normally stored and processed independently in many computers.
Cryptocurrencies have no central authority that monitors or regulates them. These digital currencies are distributed across the network, between market participants, which allows the investors or users to bypass banks or central authorities and avoid commissions for payments, or other expenses or transactions. Users acquire complete freedom of action with cryptocurrencies since there are no obligations to the network. Since their money cannot be frozen, they can do anything that they with it.
This is one of the many reasons why most governments and centralized financial organizations do consider adopting cryptocurrencies as legal modes of payments. Countries like India have launched their own centralized cryptocurrencies to ensure that illegal practitioners cannot use digital currencies as their funds, and also protect investors from being scammed by such criminals.
Assets like gold and silver have tangible value due to their industrial applications. The act of buying goods like jewellery and accessories, and so on are considered as purchasing value. Then when it comes to unencrypted cryptocurrencies, their underlying blockchain technology and cryptography tend to solve several issues regarding double-spending. Similar to physical or local currencies, digital currencies also contain some intangible fundamental value with their decentralization and somewhat limited supply. The rise of the pandemic led to widespread inflation, which led to the fall of global economies. With this ongoing circumstance, investors took refuge by investing in cryptocurrencies. Alternatives of fiat currencies like Bitcoin became an enticing asset to invest in.
Even though very little of their kind can be used as legal modes of payments, giving investors very little space for using them for other purposes, their limited supply and scarcity play a crucial role in the investor preferences to use digital currencies as protection commodities against inflation. There are several success stories coming from crypto traders and investors who have achieved high earnings via crypto trading. But there are several skeptics who would rather consider otherwise and deny the usefulness of cryptocurrencies. But why?
Several critics believe that making an unlimited number of transactions securely in an unsafe and decentralized environment does come at a cost. The underlying blockchain networks of the cryptocurrencies do not allow previously verified transactions to be deleted or erased. Therefore, blockchain and crypto companies can collect unwanted data without the permission of the users. That's not just it, market analysts who are not in favor of cryptos say that all assets should carry basic tangible benefits. The whole point of being a digital asset class without any inherent value is farcity.
They believe the technology is just a technique to carry out transactions and has nothing to do with cryptos or industrial benefits. Cryptocurrencies have no inherent value and should be considered as an asset class. Also, considering cryptos as a currency is even wrong since the printing of currency in either physical or digital form is always based on some kind of tangible asset, like gold or other assets, and major cryptocurrencies like Bitcoin and Ethereum do not follow this rule, leaving us with the few hundred stablecoins.
The entire idea behind cryptocurrencies is that it is a popular and fast-growing industry with extreme volatility and quite decent to high-profit volumes. It depends on the investors' mentality and preference if they are willing to risk their money on a growing trend or restrict themselves from going with the flow. Nevertheless, it is always safe to monitor the growth and dynamics of the market.
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Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.