Block Chain, digital coins, virtual currency, and cryptocurrency were the most common words we heard during the last 2-3 years. On one side it paved the way for new markets in the whole world while on the other side it also created certain unrealistic expectations in our minds regarding supernormal profits and gains with lower investments.
In this blog, we will briefly discuss what this technology actually is, its advantages and disadvantages and will predict the most probable future in the light of all the related factors.
What actually Cryptocurrency is?
Simply speaking Cryptocurrency is a digital currency or we can say a digital asset which is designed as a medium of exchange. Bitcoin, Bitcoin cash, Ethereum, Ripple, Lite coin etc are some well known and common digital coins. Whereas Blockchain can be simply explained as a mechanism through which all these transactions are recorded and processed. Unlike a conventional banking system, this is a decentralized system means there is no central controlling authority.
Crypto Currency and Pakistan
While all the developed nations including America, Korea, Russia and the UK etc are moving to adopt digital currencies, fortunately, or unfortunately in Pakistan, this technology was always criticized from the beginning. Due to some serious issues regarding high volatility in price, higher incidence of fraudulent & Ponzi schemes and most importantly due to chances of money laundering, cryptocurrency got banned in April 2018 by State Bank of Pakistan.
No doubt there are pros and cons of everything in this world. Same is the case with these digital coins.
Unlike international cash/money transfers through banks which normally takes 1 -3 days to complete, cryptocurrency is a faster medium of money transfers. In case of blockchain technology, the average transfer time is from 20 mins to 24 hours depending upon the load on the blockchain network and the transaction fee involved with such transfer.
Simple vs Complex transactions
No doubt the process involved in processing cryptocurrency transactions is complex in nature as compared to traditional banks. For instance, if we want to send money to someone in abroad first we need to deposit the fiat money on e.g bitcoin platform and then we need to purchase bitcoins and send it to the desired recipient. The recipient will now sell the bitcoins transferred to him and withdraw the fiat money in his/her bank account. Whereas in case of transfers through banks/ transfer agents you only need to tell them how much money you want to transfer and to whom such transfer should be made and you are done. You can clearly see the difference in the level of complexity between both platforms.
While using cryptocurrency transfers you must bear in mind that the fee involved in processing such transactions is quite high as compared to traditional banks. In blockchain network, the fee is charged twice, first when one buys the digital coins and secondly when the coins are transferred/sent to your own wallet or to other recipients. Whereas in the traditional banking system there is no such double charging of a fee.
Centralization vs Decentralization
The biggest difference between the two platforms is that traditional Banks are centralized in nature means that there is a central controlling authority which keeps an eye on all the matters related to supply and value etc of fiat currency where the blockchain is decentralized in nature which involves peer to peer cash/ coins transfers.
To conclude I must say that while considering all the above factors, in the near future say (8-10 years) we may not expect a positive acceptance of blockchain technology in Pakistan. As the traditional banking system will keep on strengthening. However, due to the Global acceptance of these digital coins, we can expect blockchain to slowly and gradually strengthen its roots.
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