Trading, Authentification, and Passive Income
Cryptocurrencies have emerged as a disruptive force in the financial world, promising to transform it in ways that were once thought impossible. These digital or virtual tokens, backed by blockchain technology, offer a decentralized and secure alternative to traditional financial systems. In this article, we will dive into the revolutionary solutions that only crypto can provide and explore the ways in which they are changing the game for investors, traders, and businesses alike.
Trading between parties has always been subject to many regulations. However, with crypto, no regulation can stop a trade. The only laws that apply are the ones of mathematics. Since the internet is broadly available nowadays, anyone can trade using crypto. Moreover, these trades can be executed anonymously¹.
One of the most popular ways to trade virtual goods is by using DeFi — Decentralized Finance — services. The most famous one is Uniswap, which is called a DEX — Decentralized Exchange. It allows any internet user to exchange one cryptocurrency with another. For example, you can exchange USDC (a cryptocurrency backed by dollars) with PAXG (a cryptocurrency backed by gold). Therefore, you can buy gold with dollars without going through any intermediary.
Blockchain technology creates a public ledger where all entries are readable by anyone, but only the owner can modify an entry. The main usage of the technology is to keep track of virtual coins, but it can also be used for other virtual properties. Another type of property that can be maintained by a ledger is NFT — Non-Fungible Token. These can be any virtual object that is owned by someone: a simple picture, a GIF image, a video, etc.
This authentication mechanism can also be used for more critical documents such as identification documents like IDs, driver’s licenses, and passports. It can also be extended to property certificates like real estate, cars, and jets. As long as everybody agrees on this authentication mechanism, it can be used to this end.
A New Passive Income Stream
In the traditional financial system, money is created using debt. Usually, to gain money using this system, you can lend your money to expect a return with interest. The cryptocurrency world uses a different mechanism. There are two types, depending on the consensus mechanism used by the cryptocurrency. The traditional one is based on how much computing power you provide to the network. The more you provide, the more coins you can make. However, you need to set up “mining” computers and pay their electricity bill. The network will use this additional computing power to further secure the network.
The second mechanism uses your funds to secure the network. The action of providing the funds is called staking. You still need a computer to interact with the network, but your share of coins does not depend on the amount of computing power you provide. Instead, it depends on the number of funds you stake. There are even some staking services that can be used to stake your funds with no computer.
Cryptocurrencies and the technologies beyond them are just getting started. By removing intermediaries for trading and for authenticating property, they are revolutionizing the financial world. They also provide new mechanisms for money creation that are not based on debt. These mechanisms can create money without lending it, providing a new passive income stream. It’s time to explore the possibilities of cryptocurrencies and embrace the future of finance.
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