Five of the Most Important Use Cases for Cryptocurrency

Views:2594 Time:2019-07-31 14:11:07 Author: NiceNIC.NET


Use Case 1: Digital Cash

Conceived as a peer-to-peer electronic cash system, if the title of Satoshi's whitepaper is to be taken at face value, Bitcoin lived up to its billing for the first five years. Before the mainstream came to terms with Bitcoin, it fueled a nascent digital economy that included black market goods (Silk Road) and gambling (Satoshi Dice). It was also accepted by hundreds of tech-savvy merchants and early adopters, for purchasing everything from graphics cards to t-shirts.

 

Use Case 2: Programmable Money

Smart contracts actually predate Bitcoin, having been conceived by Nick Szabo (who is himself credited with being one of the likelier candidates to be Satoshi Nakamoto). Smart contracts are simply blockchain-based executable code that actions a particular outcome provided certain conditions have been met. Although synonymous with Ethereum, most crypto networks have a degree of smart contract functionality, including Bitcoin itself.

 

Use Case 3: Collateral

Lending has become one of the most important applications of the burgeoning decentralized finance (defi) movement, enabling individuals to collateralize fiat loans against cryptocurrency and vice-versa. On the Ethereum network, lending services such as Maker, Compound, and Instadapp have flourished, with hundreds of millions of dollars' worth of assets now locked up in lending protocols. Other defi lending solutions include Dharma and Dydx, while centralized alternatives include Salt, Youhodler, and Nexo, which allow people to obtain a fiat loan in exchange for locking up their crypto. There's also the option for hodlers to earn annualized interest by locking their cryptocurrency into these lending protocols.

 

Use Case 4: Governance

Governance might not sound like the most exciting of use cases for cryptocurrency, but on-chain voting is a very effective means of ensuring provable voter turnout. Bitcoin miners have long engaged in primitive governance by signalling support for protocol changes by signing new blocks; in June 2017 for instance, 80% of the BTC network's hashrate was adding the letters "NYA" to blocks in support of the New York Agreement (which ultimately failed).

 

Use Case 5: Collectibles

Non-fungible tokens (NFTs) represent unique digital assets. These typically comprise in-game collectibles such as skins or characters, or in virtual reality games can represent digital land or property. This makes it possible to trade the assets to fellow collectors or players, and ensures full ownership of the collectible. That's not to say that NFTs are fully decentralized, however, as their value still depends on a central authority, say Cryptokitties or Cheeze Wizards, which hosts the image associated with each token and controls the virtual world it operates in. Nevertheless, collectibles represent a growing vertical within the cryptosphere, with NFTs likely to become deeply embedded into esports and virtual reality in the years to come.


Evolving Applications for Crypto Assets

Cryptocurrencies are still young, and thus many of the envisioned use cases for them have yet to fully materialize, often because the infrastructure is still being built. Security tokens, hybrid tokens, derivatives, crypto commodities, privacy coins, stablecoins, work tokens, discount tokens and many more have still to establish themselves, but are likely to gain a foothold as crypto adoption increases and the ecosystem matures.


Source from Bitcoin.com, author Kai Sedgwick

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