Nowadays, internet users are increasingly turning to cryptocurrencies as a basic tool to pay for various goods and services. Why is this so? The fact is that just a few years ago, it was impossible to imagine such a universal tool as cryptocurrency. Everyone was using classic Visa, and Mastercard payment cards. Also, many used Neteller or Skrill in order to make purchases and payments. However, people using such cumbersome systems were always in different circumstances, such as high payment waiting times and high fees. In addition, classic payment instruments offer no anonymity. Any public service is able to see who the payer is and where the money comes from.
This is why online users have come to understand the value of cryptocurrencies, which are quite heavily protected by cryptographic encryption. In addition, many cryptocurrencies offer either a flat fee, for transactions on the network, or based on a certain percentage, which is more profitable for customers. And the fast transfer rate in modern blockchains is a fraction of a second, which is much faster than all existing modern centralized payment systems.
Cryptocurrencies ensure your privacy
In most cases, either hash functions or cryptographic digital signatures are used to ensure security and anonymity. This is more like a real bank, where you have to notify the bank and sign the cheque that you will eventually receive when you transfer a sum of money. In this case, the bank is the controlling party of the transaction. In the case of cryptocurrencies, the bank will not control your transactions when you send money. However, every transaction (sending of funds) must be confirmed with a cryptographic signature. It is like signing a payment document at a regular bank.
Just imagine, all the information about every transaction of a particular cryptocurrency is stored on a huge number of computers that are linked together in one node: the blockchain. The amazing thing is that every transaction ever made on the blockchain is stored on every computer that is connected to the network. Again, if we look at open systems like banks, they did not know and did not know how to synchronize information. However, a solution to such a problem has emerged with the creation of a major cryptocurrency, bitcoin. One of the main tools used in cryptography is hash functions. It is these that serve as the ‘building blocks for building the blockchain that captures every transaction. This is why every participant in the network remains anonymous, because they do not use any input data, but only the hash function and the passwords of their wallets.
One of the main methods to ensure the security and anonymity of cryptocurrency is the so-called zero-disclosure protocol. This protocol serves as a confirmation that you have some information and does not disclose its contents. This approach is relatively new, and before cryptocurrencies, it was used for completely different purposes. However, some industries have benefited in a big way with the introduction of this protocol, for example, the online casino industry where cryptocurrencies have made no KYC casinos possible.
As mentioned above, all the computers in the blockchain are linked together in one huge network. When you make a transaction with your funds, all the users on that network can see the transaction. It is the zero-disclosure proof that allows you to hide that information about how much money is in a particular account and what kind of account it is. This is securely encrypted using hash functions. In order to confirm the transfer and that your transaction is valid, you need to provide the basic property of the records, and you don’t have to provide specific numbers. This is how proof with zero agreement functions.
In some cases, homomorphic encryption is used to preserve even greater anonymity. This type of encryption allows various mathematical operations to be performed on the encrypted data, which are fully consistent with the results of the calculation. The main idea and approach of the listed methods are to ensure proper synchronization, maximum security and safety of each network participant’s funds.
There is no need to open an account
Cryptocurrencies provide users with maximum anonymity and so many of the wallets do not ask for your email or other details. This comes in handy when you don’t want your personal details compromised. Of course, there are some sites that require users to register and enter at least an email. However, you should not blindly trust such sites as they can be used against you.
In most cases, in order to get a wallet and start using any of the cryptocurrencies, the user will be required to get one (install or download). The fact is that there are both desktop wallets, hardware wallets, online wallets, and wallets in the form of browser extensions. Generally, the process of opening an account in all wallet variants is the same: you need to remember the mnemonic phrase as well as your password and wallet number. The set of data gives you access to use a particular cryptocurrency. However, a hardware wallet uses only a password, but it is more secure because it is in your hand.
The difference between online wallets and various extensions like Metamask, TronLink, Polkadot, or Keplr for Chromium-based browsers is great for those users who use cryptocurrency daily. Here, you will literally need to click several times in order to make a payment. Moreover, with such applications, once installed, there is no need to enter the mnemonic phrase every time. All you have to do is enter your password and use it. Hence, cryptocurrencies offer many options without long registration processes. In addition, they provide you with anonymity in that they do not require personal details.
Lower fees and faster transactions
Cryptocurrencies are a great payment tool, if only because there are either no or only small transfer fees. Typically, if a fee is charged, it is a reward for the validators (those users and computers that maintain the blockchain of a particular coin). There are some types of blockchain where the commission is burned off. That is, one person transfers a particular cryptocurrency to another and a commission is charged for that transaction, but it does not go to a particular validator but is burned into the network immediately. But, keep in mind that it happens that in some blockchains, the fees can increase many times over. This is due to the huge demand for a particular cryptocurrency, which means that validators need to process too many applications. Users are charging fees to ensure that their transaction is completed as quickly as possible. It turns out that in this case, you have to pay a higher fee to transfer funds more quickly.
As you can see, everything, in this case, is interconnected. However, the average speed of cryptocurrency transactions is much faster than payments by centralized payment systems. Take the Keplr wallet, for example, where transactions are completed in seconds. Of course, older blockchains are more cumbersome and much slower. But, new blockchains like Tron, are simply instantaneous and make transfers at lightning speed.