The advent of the cryptocurrency world is upon us. Cryptocurrency is a digital currency that uses encryption to store coins on a virtual system. As an avid and current cryptocurrency investor, the “crypto” world offers a new dimension of financial security. The idea of a decentralized financial system through a virtual network is here to stay.
In addition, the technology that was once introduced as the sole corresponding technology of cryptocurrency, blockchain, has sparked the interest of countless people, thus branching out and becoming a force in and of itself.
In light of such events, it has become all the more popular to speculate how cryptocurrencies and blockchain will disrupt nearly every industry, regardless of its standing or how long certain practices have been in place. Furthermore, many also like to compare the more common, centralized framework of financial security with the newly adopted blockchain world that supports a decentralized cryptocurrency network. With that in mind, let us compare both systems and provide some insight to how both can work in the future.
A centralized system is where one entity, such as the government, regulates the market and hence many large investors typically manipulate the flow of the market. The typical structure of such system includes a system of buying, selling, exchanging and regulation. These are the typical components of any centralized system. Oversight is performed by a governmental entity like the U.S. Securities and Exchange Commission. Their goal is to protect investors and to incorporate fair business practices to those offering financial security. Now we will take a look at decentralized financial systems.
Cryptocurrency trading represents the foundation of a decentralized financial system. A decentralized system represents a virtual economy through a common network (the internet), which is independent of oversight. Blockchain technology is the digital ledger that records cryptocurrency transactions chronologically. Instead of physical paper money, currency is in the form of a digital footprint. Since a decentralized system is through a common network, it is almost impossible for one entity or government to oversee the entire system. Individual countries can regulate how they deal with cryptocurrency but there is no central order in control.
So what does one make about both types of systems and can both systems survive together? Both systems should be embraced as both offer more investment options for the consumer. A true understanding of the new decentralized system could benefit those that are not familiar with the new world network.