Ever since bitcoin was introduced in 2009 and other tokens followed suit, the cryptocurrency effect on the economy has been undeniable. Though their adoption started slowly and was riddled with speculations, recently the belief in these virtual tokens has skyrocketed to the point that at least 320 million people worldwide own at least one crypto coin.
In truth, the impact of cryptocurrency on the economy hasn’t been as pronounced as that of the stock market. However, for a market that grew to $1 trillion in less than fourteen years of existence, there is a high chance that it may dominate the global financial market in the nearest future. This is especially true considering the large number of web3 companies sprouting up in this space and building disruptive products.
How the Blockchain Technology Affects the Economy
The job market is one of the areas that has benefited the most from all the impacts of cryptocurrency on the economy. There has been a surge in demand for talents both in technical and non-technical roles in the web3 ecosystem. This digital space has created jobs for:
Smart contract developers
Technical writers, etc.
Recently, web3 companies have raised billions of dollars from venture capital to expand their operations. This has resulted in increased worth for the startups, and consequently, has birthed numerous web3 job openings waiting to be filled.
The blockchain space doesn’t just provide jobs; they provide high-paying jobs that trump most of the figures people make while working on the web2 internet space or the conventional financial market. For instance, a smart contract developer working in web3 can make up to $200,000 per year. For non-technical roles like Project Management, you can also rake in up to $160,000 per year.
How Cryptocurrencies Affect Wealth Creation
Before the advent of bitcoin, creating personal wealth used to follow the traditional patterns of getting a job, saving up, and investing or starting a business. Some others made wealth by inheritance, but cryptocurrency has brought a new twist that makes it possible for anyone to become wealthy just by being an early adopter of a crypto token.
This year, virtual currencies have brought up 19 billionaires into the Forbes list and created wealth for millions of other adopters. The most beautiful part is that you don’t even necessarily have to start with a capital. Some people started their wealth-creation journey by collecting airdrops.
These smart individuals belong to web3 communities where they get firsthand information about new virtual tokens and projects. They then position themselves to perform some meager tasks such as sharing updates about the project on social media. In return, these projects reward them with airdrops, which oftentimes run into thousands of units of the token.
At first, these tokens do not have any reasonable value, but after being listed on exchanges, the value can skyrocket, and the airdrop winners start smiling at the bank. In the same vein, many people who bought virtual tokens at very cheap prices, have increased their net worth by holding these coins for a long time, and selling them when the price “hits the moon”.
All of these have positioned bitcoin as a tool of economic empowerment, which is the reason for its viral adoption. Although digital currencies are still marred in volatility, more wealth is created each time when any coin reaches an all-time high.
How Cryptocurrencies Affect Financial Institutions
For obvious reasons, most governments all over the world dislike bitcoin and other digital currencies. This is because governments thrive on controlling almost all financial transactions that happen within their border. Bitcoin makes this almost impossible.
Bitcoin and several stable coins have provided a unified currency independent of the varying exchange rates. As a result, a remote worker in Africa who works for a company in South Korea, for instance, can now receive their payment in bitcoin or a stablecoin like USDT within a few minutes. This way, the employer doesn’t have to pay for currency conversion or a wire transfer, both of which would have generated money for financial institutions and the government.
Due to their inability to regulate bitcoin like fiat currencies, and its volatile nature which makes it unpredictable, governments are making efforts to clamp down on virtual currencies. Bolivia has restricted the use and trading of crypto coins since 2014. China, Egypt, Morocco, Algeria, Bangladesh, Iraq, Tunisia, and Qatar, have also banned bitcoin. These restrictions were made to help the government and financial institutions to remain in control of financial activities in these countries.
How Cryptocurrencies Affect Transaction Costs
Cryptocurrency transactions are not free of charge. But they’re not as expensive as bank charges, retail foreign exchange markets, and the charges of other financial institutions like PayPal and the rest.
Some crypto exchange platforms charge $0 for transactions. Some others charge as low as 0.2% per transaction. Many exchanges have a flat fee for sending stablecoins. Binance, for instance, will charge you as little as 2USDT (approximately $2) to transfer up to 1000 USDT. It is that cheap!
The cost of any blockchain transaction depends on the network. However, while the TRON network arguably charges the cheapest network fees for inter-wallet transactions, the Ethereum network (ECR-20) charges one of the most expensive transaction fees in the industry.
In all, blockchain transaction fees are a lot lower than those of banks and traditional financial institutions. Hence, the cryptocurrency’s effect on the economy rubs off badly on these institutions. This is because bitcoin users would rather make and receive payments via digital currencies than allow banks to make money off them via transaction charges.
How Cryptocurrencies Affect Transparency of Financial Systems
Unlike traditional banking and financial systems where sensitive data is confidential, the blockchain encompasses an open ledger where everyone on the network can see all transactions. But then, there are downsides to it.
The blockchain confers on users a pseudo-anonymity that makes it challenging to trace and track transactions. While you may see the transactions on the open ledger, there are no names or personal data attached to them. This loophole is one of the negative impacts of cryptocurrency on the economy that governments have capitalized upon to justify their clampdown on bitcoin.
Problems Limiting Bitcoin Adoption
Other problems surrounding the adoption of bitcoin and other virtual currencies include:
They’re volatile and dips could last for a long time, thereby wiping out millions of dollars in financial assets within a short time.
You will lose all your money completely if you lose your wallet’s seed phrase.
When making a payment or transfer, making a slight mistake in the receiver’s wallet address could result in the permanent loss of your money.
Bitcoin is a safe haven for money launderers and terror financiers.
Cryptocurrency’s effect on the economy is undeniable. It has created a trustless, transparent, and decentralized platform for financial transactions. It has created wealth for numerous early adopters and impacted economies in a way that governments are fighting hard to regulate these digital assets, to ensure that their currencies don’t fizzle out.
The future looks bright, and you too could enjoy the benefits that it holds if you join a trusted web3 community where you can get all the necessary information including blockchain events, job opportunities, and many more.