What is the driving force behind the increasing popularity of cryptocurrencies? Well, there is no definite answer to this question, just as the reasons one might decide to invest in cryptocurrencies vary from one investor to another. However, there are a couple of possible reasons behind the rise of cryptocurrencies, with the speculative nature of bitcoins and other cryptocurrencies being fundamental.
Here are three possible reasons behind the growth of cryptocurrencies into the global force it is today.
Used to Store Value and as a Digital Currency
The decentralized nature of the blockchain and the end-to-end encryption of cryptography makes bitcoin trading permissionless. As such, this allows traders to transact the financial value of these coins without involving a third party. This is perhaps the main reason why merchants are increasingly accepting cryptocurrencies.
On the other hand, the fact that cryptocurrencies like bitcoins have a finite value makes them quite attractive. Some people buy and keep bitcoins with expectations that the forces of demand and supply will force the value of cryptocurrency to increase – this is what makes them a store of value.
Different utilities have been tokenized onto the blockchain. This has created a market that allows you to subscribe to services or buy commodities. For instance, one can use bitcoins to rent cloud storage space or rent it out and get paid using bitcoins. The possibility of executing a smart contract using cryptocurrencies could be the reason behind its popularity.
Transacting on the decentralized blockchain remains attractive to most people as it takes away the power to keep and control value from a few people. The fact that there is no single entity controlling the value means that the supply and demand cannot be manipulated or compromised by some bad actors.
As the world transitions into having a global economy, bitcoins and other cryptocurrencies will undoubtedly have a role to play.