Cryptocurrencies and the operation of the financial system

Cryptocurrencies versus the traditional financial system

The world of crypto is fascinating – it combines the heights of technology with finance. The emergence of digital assets has pushed the world forward by offering incredible opportunities to realise various ideas that, otherwise, might never have seen the light of day. They have created an alternative to the fiat financial system, that is, where money is not linked with any other assets, e.g., precious metals. A model for the operation of economies where money is a record in an account located on the server of an institution carries certain risks. These include the more prosaic ones, such as a system error resulting in the cutting off of one's funds, and the more complex problems, such as a lack of anonymity or the tendency to make unfavourable financial decisions, to which the persuasion to over-credit a bank customer on the basis of tracking one's income and analysing expenses contributes.

Digital assets are the essence of the open market

The market is a space that (in classical terms) is governed by the fundamental law of supply and demand. This means that if an asset is present, the sum of the actions of sellers and buyers shapes the price at a particular level (at a specific time). The demand for cryptocurrency is determined by a huge number of factors, from its uses to its popularity in the social media world. However, the final price is the result of the open market. If a solution is no longer competitive or does not have a specific utility value from the beginning (and only enjoyed a short burst of popularity, e.g., due to influencers' buzz), its price may fall. The decline in their popularity can be viewed as something positive, as it means that this is what the market has decided – no external entity has influenced the unnatural maintenance of value.

Crypto is the ticket to realising great ideas

We mentioned that some ideas might never have seen the light of day if crypto didn't exist. In this case, it means that in this day and age, realising valuable ideas is easier than it used to be. Fundraising for a start-up is characterised by the fact that it is more likely to find hundreds of smaller investors who buy the token for a few hundred dollars than, for example, a few with large capital. Here, the operations of the open market (on the investment side) are once again manifested, where if something is valuable in the eyes of investors, then it will find its funding. The launched project then needs to be transparently developed and improved to be competitive and present the highest possible value from the point of view of the solutions it offers and the financial side.

The blockchain industry is a competitive environment

A huge advantage of crypto projects is that this industry is highly competitive. This means in practice that simply launching a project is only part of the success. Sustaining it for years and developing the token's value is the biggest challenge. There are many projects being launched globally every day. Those that survive are characterised, above all, by the clearly defined value that the project offers. This can be a solution to a specific problem, a given improvement, a technological innovation, opportunities to multiply funds, etc. The project must also meet all the conditions that classic companies in the Web 2 world have – be managed wisely, have effective marketing, be profitable, have specialists in its field on the team, and constantly grow to keep up with the competition. A common complaint about the crypto world is that projects tend to fail. However, it's not due to being blockchain-based itself. After all, in the traditional market, companies also collapse, and new ones come into their place. This is the natural mechanism of the open market.

Blockchain is becoming increasingly popular

Cryptocurrencies have become an integral part of the financial landscape. To benefit from their full potential, it is necessary to push aside untrue stereotypes and fully understand the essence of blockchain. It is not just a simple tool – it is a separate digital reality governed by its own rules, which aim to fix the imperfections of the current financial system. The popularity of cryptocurrencies is growing every year, reflected in the fact that more and more individuals and institutions are taking advantage of them. Universities are adding blockchain-related courses to their offerings in increasing numbers, and students are eager to educate themselves in this area. It's an industry worth being as close as possible to stay on top of global developments in the fin-tech field.