Why Do We Need Cryptocurrency?

August 2, 2021
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Since the start of history, humans have created tools in order to achieve an end goal. All tools have a purpose, hence why they are created, which eventually leads to the question of: why do we need crypto? Cryptocurrencies may be secure, decentralized, and anonymous, but what use does it have for the average person?

In a highly advanced world with vast and diverse ranges of technology, the concept of cryptocurrencies may seem weird. We already have banks and their subsequent digital tools for retail users such as mobile banking, e-banking, online account management, etc. On that account, what is the selling point for switching to cryptocurrencies when banks represent an existing viable option?

Although our previous lessons sufficiently showcase the use cases of assets like Bitcoin and the benefits of blockchain technology, we will still put our efforts into explaining how practical digital currencies are for average users.

Why Should We Own Cryptocurrencies?

With the aforementioned point regarding the comfort and utility provided by banks, recommending cryptocurrencies to a friend or family member is comparable to selling ice to an Eskimo. But not all people are Eskimos, and there are plenty of desert-based users in dire need of water.

Not Everyone Needs Crypto, but the Unbanked Certainly Do

The fact is that users from developed countries ruled over by benevolent and trustworthy governments, do not explicitly need cryptocurrencies. Bitcoin removes the need for trust, and when trust is not an obstacle, traditional financial systems are enough. That is to say, an American or European surely has reasons to own or even use cryptocurrencies, but anything past being a hobby or educational activity is too much.

On the other hand, citizens from other parts of the world who cannot trust their governments and banks have an immense need for cryptocurrencies. For example, a Venezuelan suffering from hyperinflation is incentivized to convert his salary into Bitcoin for the purpose of storing value. With a collapsing currency and no ability to purchase foreign fiat currencies, decentralized currencies are the only way.

Study Case: Nigeria

Likewise, those who do not have access to banks (and statistics show that there are 2 billion unbanked people in the world) are also motivated to own cryptocurrencies. The African country of Nigeria is a great example of how Bitcoin is not merely a speculative asset and that there are practical cases in which cryptocurrencies replace banks.

According to data from peer-to-peer trading platform Paxful, Nigerians traded a total of $65 million worth of crypto on a monthly basis in 2020. In a single month, citizens executed 1.1 million trades, spending an average of $100 on each trade. Meanwhile, U.S investors spend $215 per trade, which is not a large gap taking into account the difference between the size of Nigeria’s and America’s economies.

In an interview for the BBC, a local investor stated that she was forced to purchase cryptocurrencies once Nigerian banks started charging high commission rates on cash transfers. Coupled with a massive inflation rate of 16%, the investor confirmed that cryptocurrency became a banking system in Nigeria, and that it is not about making money.

"It wasn't about making money. It was about how [to] have a better banking experience. Look at it as saving your money in a currency that can keep the value of the money."

Moreover, other investors told the BBC that they had their bank accounts frozen after participating in protests against police brutality. With growing frustration surrounding government policies and a declining Nigerian economy, it is no wonder why Bitcoin became a clear alternative.

Final Word

Cryptocurrencies are decentralized, impossible to forge, anonymous, and extremely secure. These features combined enable decentralized technology to be used in the same manner as a bank. While there is currently no need to substitute banks for cryptocurrencies in developed countries with trustable governments, other parts of the world certainly do.

The previous examples have shown that crypto’s use cases extend far more than trading and speculation. Inflation, irregular banking procedures, and illegal government sections are all perfect reasons to use Bitcoin rather than a local currency in sadly lawless countries. So far, the unbanked were left alone to their fate, but the arrival of Bitcoin has changed that forever.