With the birth of virtual money and digital currencies, the performanceof transactions is wider and can be carried out in a secure way from any place in the world.
A trustworthy third-party
Trust in the money transactions field is crucial, however, it isn’t always a constant element. The risks that all the stakeholders run in a negotiation mostly lie on the possibility that any of them break the acquired agreement, reason why the participation of a third party is used as an endorsement, witness or safeguard to fulfill the agreement in most of them.
Many other things can mean money, and not necessarily paper money created by some financial institution of some government. Money is everything with acquisitive and transactional capacity. It’s one of the greatest needs of the human being, beyond the ambition or greed of some to gather high amounts, as it’s a tool that allows people to obtain goods, services, possessions, luxuries, health, and many other things.
Currently with the development of technologies that have allowed the performance of transactions without the presence of physical money, and even more with the birth of virtual money and digital currencies, the performance of transactions is wider and can be carried out securely from anywhere. These are transactions that depend on the trust that the participants give to the negotiations due to the nature of the channels used, which operate in decentralized platforms.
The value of money
There is a huge difference between these forms of money used for digital transactions, as they don’t have any physical backup, and fiat money, represented by bills, which had a physical backup in goldquite some time ago, endorsed by governments who were responsible for the issuing of them. In countries like the U.S., this back stopped at the beginning of the 70s, being replaced by fiduciary money, which doesn’t have any physical product to back its value either. This makes moneybe valuable because people decide it to be, and everyone, somehow, agrees with it.
With this transformation of money backup, a new era of money valuation started. More bills were printed without taking into account the gold reserves. It opened the doors to earn more money. Additionally, it brought money stability, based on the value people assigned it. If the money value was affected by a generalized financial fall, everyone’s money value would also be affected.
This is a generalized conception around money, it has value because we decide it, it’s valued because everyonearound the world says that it has a value, exchange, and acquisition capacity that those who use it have assigned to it. Money would be nothing but paper without these features.
The first product the emerged as a tool to use nonexistent money was credit cards. By making a purchase on credit,a person is using money that they don’t have yet, but they would need to pay later.. This payment modality quickly had a great boom that still prevails.
However, the current technological advancements allow performing these types of transactions without the need for a physical card, through online payments in platforms designed for these purposes by different banking entities.
Although this reality greatly facilitates performing transactions, it involves a risk that many aren’t willing to take, the exposure of their personal data, reason why there has always been a widespread desire since the beginning of digital transactions to have a form of money that manages instantaneous transactions securely and privately, that is impossible to track and anonymous, but still completely digital; that doesn’t rely on a powerful Central Bank, a bank account that couldn’t be frozen at the whim of an official, i.e., a form of online transactions where there is no third party taking control of everything.
Trust and decentralization
The internet that we all know and use today was developed to generate trust among users, backed up by the idea that whoever uses this technology is a verified part, however,this is no longer the casetoday, and that verifiable user trust is almost non-existent. This leaves us in a quite contradictory situation in terms of digital transactions, as we don’t want a third party sticking their noses in our business but in reality we need a third party to take note of everything that’s done on the network.
All this was said to show the transcendental nature of the creation of Satoshi Nakamoto. Who is Satoshi, we will most-likely never know, but what’s certain is that the creation of Bitcoinhas forever transformed the environment of digital transactions, thanks to the technology that supports it, Blockchain.
All doubts and needs of the users of digital transactions seem to have been cleared out with the famous blockchain, a transactions ledger, similar to that handled by banks, which is constantly updated with each transaction made by everyone, it tracks how much money each account has, who they paid to, and when. The big difference is that this accounting book isn’t in one place, but the copies are found in many computers around the world.
Blockchain has created a backup not only for transactions made with digital money or cryptocurrencies, but for many operations that require secure registration of personal data and private or classified information. It’s thanks to cryptography that this is possible, and the fact that there isn’t a single person who manages the record book allows anyone to look at the ledger and make sure that nobody does anything suspicious.
One of the capacities of the most transcendental blockchain lies on the difficulty that’s generated for the fulfillment of the agreement when performing transactions. This reality is possible thanks to the incursion of Ethereum in the digital universe, and the creationof‘smartcontracts’through its blockchain, created ascodebits that are automatically executed when they receive the activator, and that includes all the necessary information for the exact fulfillment of the agreement. Smart contracts act as a trustworthy third party but the difference is that you can actually trust without a doubt since it’s a software code.
Bitcoin and Ethereum have become the most popular cryptocurrencies, but they aren’t the only ones. Many others appear every day and everyone wants to access them, some maintain the initial decentralized nature, others allow some control.
The question is, which will stay stable and which will end up disappearing? As like ordinary money, cryptocurrencies have the value assigned to them, which is useless unless they can be exchanged, so they don’t have the ability to change the way money works, they’re transforming the way it’s used. Therefore, the cryptocurrencies that will remainthe most operativewill be those that manage to maintain their ability to acquire value through the transactions that are carried out with them.
The greatest transformation that these digital assets have brought is the security they provide to those who use them, without the participation of third parties that can know how many they possess, what transactions are carried out with them, and where they are stored, which could be determined as actual money reliability.
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