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Cryptocurrencies have always been in discussion since their launch. As of now, it is well-known that cryptos can potentially enable social and economic growth across the globe by their more accessible access to financial services.
Blockchain technology can transform the financial system by excluding mediators. During the start, cryptos were considered a doubtful scheme, but many giant investors have shown interest in these with the passage of time.
Now, the question arises of how can these virtual currencies affect the people within developing countries. Let us first briefly understand how virtual currencies differ from fiat ones and how are they advantageous.
The first point that comes to our mind is that Fiat currencies are regulated by the government while virtual currencies are not. Cryptocurrencies are entirely decentralized, which means that there is no institution that governs digital currencies.
Another difference is that cryptocurrencies are highly volatile compared to fiat currencies. It means that their prices can fluctuate rapidly. This is the most probable reason why cryptos are less likely to be used as a payment method.
Talking about the advantages of virtual currencies, they combine the various essential properties, including transparency and accountability, allowing trust-free interactions among different parties. The use of cryptocurrencies constitutes blockchain technology, which uses the consensus algorithm, private key encryption and hash functions for controlling the transactions.
Now, when the government doesn't control the virtual currencies, these can be used worldwide, i.e., cryptocurrencies are not restricted to any specific geographic location. It is indeed is a significant benefit of using cryptocurrencies.
The developing countries are those which have less developed industrial sectors and a low human development index. Although there are no specific criteria to label one country as developing, developing countries most often have low per capita income, poverty, insufficient food supply and low life expectancy. The primary fact about developing countries is that the assets are not equally distributed among the population.
Now, talking about financial intermediaries such as banks, these are very much essential for the people living in developing countries. The reason is that they can provide various companies with loans, which otherwise is quite difficult to obtain in those countries. These companies in developing countries have these financial intermediaries as the only source of funding, leading to competitive disadvantages compared to companies outside the country. So, it is pretty evident that these financial intermediaries are not sufficient to meet the increasing need for funds, which leads to the country's poor economic condition.
Here cryptocurrencies can provide a solution. Do you want to know how? Well, they can provide us with innovative technologies to solve the economic problems of the country. For instance, people can participate in international trading without requiring a bank account. Even small businesses can initiate international trade at a smaller scale. With cryptocurrencies such as Bitcoin or Ethereum, traders can sell their products in exchange for cryptos, which can avoid the requirement of a traditional e-commerce system.
For using virtual currencies, all you need is a good internet connection and a crypto wallet. So, their use is relatively easy. Isn't it?
The combination of cryptos with smart contracts can help build trust and fight corruption, which is a significant concern in developing countries. Because the records of crypto transactions are transparent and publicly available, it can help the citizens monitor their government's work.
Virtual currencies hold the potential to shape the economy of the country and especially the developing countries. They can increase the financial inclusion of the population by decreasing corruption. Individuals can utilize the emerging technologies for their benefit and enhance their future, which can indeed help in the development of the countries.
Despite various limitations of the virtual currencies (such as price volatility, illiteracy among individuals and financial illiteracy) in developing countries, cryptos hold a great potential to change their economic health for an improved future.