The crypto economy is booming, and blockchain, Web3, and the metaverse are becoming more and more mainstream. Numerous variations of cryptocurrency exist, but they’ve all found distinct applications and solutions in the finance industry.
Coins that are not issued by a central bank or other governmental entity and accepted as a form of payment are currently defined as cryptocurrencies. Electronic storage, transfer, and trading are all options for cryptocurrencies. However, most countries don’t recognize them as currency in the usual sense.
Besides functioning as a medium of exchange (through digital money) and a store of value, cryptocurrencies are also goods with an established market. A wide range of applications beyond traditional financial transactions are emerging as the market grows at an unprecedented rate – thanks to the capabilities of blockchain technology!
So, how are these used? Read on to find out.
Smart Contracts For Seamless Systems
Using pre-specified terms and conditions, smart contracts serve as a form of paperless digital code that ensures a specific outcome. Smart contracts may be used to automate activities or whole networks, such as DAOs that employ smart contracts.
By far, one of the most significant advantages of smart contracts is the degree of automation it allows. There will be no disruptions, and no outside parties will be able to change the agreement or decision. Apart from that, smart contracts include security characteristics that make them stand out. Encryption ensures that smart contracts run properly and that the data created cannot be changed or altered in any way since they operate on immutable data networks. This safeguards the security of every piece of information.
We shouldn’t be surprised that smart contracts are being used in healthcare, banking, government, and personal data privacy sectors all across the world. Of course, cryptocurrency is still an issue in India, but smart contracts are slowly but surely making their way into the economic sector here.
Powered by Ethereum:
The cryptocurrency revolution began with Bitcoin, but it was Ethereum that made cryptocurrencies a viable market. Decentralized applications (DApps), smart contracts, and the ERC20 standard for tokens have made Ethereum a global leader in distributed computing thanks to its unofficial reputation as “the world computer” for DApps.
As a basis for blockchain-based assets like utility tokens that grant holders access to DApps, online games like CryptoKitty, and security tokens that give investors a stake in a firm, the ERC20 standard, and smart tokens are a must.
Investing for all with Asset Tokenization
Even though digital currencies have a lot going for them, flaws still need to be ironed out. Unsatisfactory liquidity is one of them. Fortunately, the solution is already built into the blockchain thanks to asset tokenization.
The value of asset-backed tokens is directly linked to the value of the underlying asset. In real-world asset markets like real estate, the tokenization of assets enhances the liquidity of those assets. As a result of the digitization of assets, new markets are opened up for investors who previously couldn’t participate. Tokenization of a physical asset allows for a high degree of fractionalization or the partition of an item into many smaller pieces. In contrast, traditional financial institutions generally ban individuals with insufficient cash from investing.
With fractional ownership, investors acquire a share of the asset’s value while only investing a small sum of money. To be sure, India’s Tier-2 and Tier-3 cities stand to benefit the most from this application.
Enhanced Banking for All
Despite the basic distinctions between regular banking and cryptocurrency transactions, special banking services are accessible for exchanging crypto and fiat currencies. Known as crypto banking, this is a new component of the financial system. Digital currency trading is becoming increasingly popular since anybody with a smartphone and an Internet connection may participate.
Like regular financial institutions, Crypto banks hold digital assets and traditional fiat currencies for investors and customers. Banking institutions like Goldman Sachs and JP Morgan, as well as Barclays and Deutsche Bank, among others, have adapted their services to manage digital currencies, offering services like crypto interest accounts and savings accounts.
While legal clarity is still a work in progress in India, there is rising confidence that cryptocurrency exchanges and the ecosystem in India will soon be regulated.
Banking the unbanked with Bitcoin:
As seen by recent developments, Bitcoin is becoming increasingly popular in locations where the local populace lacks access to banking institutions.
While many of these places’ economies are still based on cash and individuals cannot afford to pay for transit to visit banks for registration, the number of people with access to or owning mobile phones is improving. Utilizing digital wallets to transmit Bitcoin may be a feasible option for participating in finance and creating a store of wealth for those without a bank account.
Efficient On-Chain Governance
Crypto is also being utilized to establish a more precise method of governing regulations, especially in private organizations or clubs.
When it comes to empowering their consumers, organizations are always looking for innovative ways to do so. Creating a decentralized autonomous organization, or DAO, and requiring members to deposit their own money in exchange for voting rights or governance tokens is one approach to achieve this. ‘On-chain governance’ is the term for this approach of dispersing power among stakeholders. Traditional management roles and the ability to modify the protocol are two possibilities for the governance tokens’ abilities.
Lastly, when it comes to disruptive applications, it’s easy to forget that the primary objective of the invention of blockchain technology was to enable truly decentralized and autonomous digital currency. Crypto has come a long way in establishing its usefulness, from the early days of difficult mining to simple transfers on exchanges today.
A new generation of investors, entrepreneurs, and tech enthusiasts have jumped on board the crypto train because of its decentralized structure, low transaction fees, anonymity, and security. Millions of crypto transactions are carried out by tens of thousands of crypto exchanges every day.
As one of the largest crypto markets in the world by users, the Indian market has embraced peer-to-peer transactions. According to a BrokerChooser study, India has more than 10 million cryptocurrency users. So at the end of the day, it is a strong message that a growing number of Indians are embracing cryptocurrency investments.
Cryptocurrencies are often viewed as high-risk investments for millennials and Silicon Valley insiders by the general population. However, there are many strong applications for decentralized digital currencies like bitcoin that are being obscured by the hysteria and speculation around them.
Even in the most mundane aspects of our lives, cryptocurrencies seem to have the potential to improve them. There will be more and more uses for cryptocurrencies in businesses and everyday life as they become more widely understood and accepted.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.