Cryptoeconomics: what is the digital economy and its importance

Cryptoeconomics is creating digital financial services capable of transforming the way we handle money on a daily basis.

The best-known example is probably Bitcoin , which brought a more practical and accessible way to make cross-border payments directly with other people.

But cryptoeconomics goes far beyond cryptocurrencies. Today, Blockchain , Metaverso and NFTs are showing that the new digital economy is here to stay and is continually developing new applications, which even companies and governments are embracing.

What is cryptoeconomics?

Cryptoeconomics is a new, fully digital economy that brings together computer science and finance studies to create financial products and services built and accessed in the digital environment.

Using cryptography to protect data and information online, the cryptoeconomy manages to create new solutions for the financial market. Among them are cryptocurrencies, tokens and NFTs.

These solutions would be capable of transforming the way we handle our money, investments and day-to-day payments.

But how is cryptoeconomics possible?

The development of the cryptoeconomy is possible by uniting different technological resources, such as cryptography, security protocols, applications and digital currencies .

This technological integration allows for more efficiency in the provision of financial services , as the automation and digitalization of processes eliminates most of the intermediaries and bureaucracies present in the traditional market.

As a result, payment systems and investments become faster, cheaper and borderless.

For example, with cryptocurrency networks , it is possible to make small payments to someone in another country at any time and day of the week, directly with the other person. In the traditional system, time limits and high fees make this type of operation unfeasible.

In addition, because it is not necessary to depend on banks or governments to operate, the user becomes the owner of his own money and has more control over how his data is being used.

So far, you can see that there are several transformations promoted by the cryptoeconomy, right? But how did it all start? Learn now:

Why has cryptoeconomics become so important?

Since the creation of the internet, computer scientists have already shown concern about the use of our data by the government, banks and other institutions. And with the financial crisis of 2008, confidence in the traditional system was further weakened.

Empowered by this sentiment, Bitcoin was created in 2008 and became the first cryptocurrency to take hold globally. Its creator remains anonymous to this day, under the pseudonym Satoshi Nakamoto .

Bitcoin’s goal is to work in a different way than all traditional currencies, such as Real and Dollar. The crypto does not have a central bank and is not managed by anyone, not even the mysterious Satoshi.

Instead, Bitcoin is maintained by a network of interconnected computers secured by cryptography.

Bitcoin began to be traded on cryptocurrency exchanges and companies began to invest in and accept BTC as payment.

Its adoption has grown over the years and, currently, the volume of transactions with BTC already exceeds billions of dollars worldwide and its market capitalization is over US$380 billion, according to Coinmarketcap .

With that, Bitcoin inaugurated a new electronic money system that became the basis for the development of all other products and services in the cryptoeconomy. Today, cryptoeconomics goes far beyond Bitcoin.

Discover below the main innovations that are allowing the advancement of the digital economy:

How does cryptoeconomics work?

Discover the main technologies that form the basis for the operation of cryptoeconomics:

Blockchain

This technology enables real-world assets to be transformed into encrypted digital assets that can be securely transacted and traded by anyone in the world.

Cryptocurrencies

Cryptocurrencies are digital currencies that are intended to function as a store of value and a means of payment. They have their own public Blockchain network and are protected by encryption.

Unlike fiat currencies, cryptocurrencies do not depend on a government to function. On the contrary, the validation of transactions is done electronically within the Blockchain.

Thus, cryptocurrency payment systems allow for more transparency, privacy and scope for financial transactions.

After Bitcoin, developers began to study possibilities of using Blockchain technology to decentralize and digitize services other than the exchange of values ​​between people. With this objective in mind, the Ethereum network was launched in 2014 by Vitalik Buterin.

Tokens

A token is the digital representation of some good or right that has market value. It could be a coin, an object, a property or even a work of art.

With the advancement of Blockchain, virtually anything can be tokenized nowadays and have its value represented digitally.

Token types can be of several, such as:

  • security tokens
  • utility tokens
  • payment tokens
  • NFTs (non-fungible tokens)

And they can still be divided into categories, such as game tokens and fan tokens .

We can say that tokens are a digital certificate that guarantees its owner the right to use some service, actively participate in the decisions of an organization or profit from its valuation.

NFTs

NFTs (non-fungible tokens) are crypto assets that represent and record ownership of a unique and irreplaceable item, such as collectibles, online game items and works of art.

Therefore, when buying an NFT, it is as if you were also buying the property right over the exclusive item that the non-fungible token represents.

DeFi (Decentralized Finance)

DeFi is the acronym for Decentralized Finance. This term refers to a vast set of new financial products and services in the crypto economy.

The aim of decentralized finance is to promote a global financial system that is independent, cheaper and accessible to all.

This includes payments, loans, decentralized brokerages, among other services that do not need human interference or intermediaries such as banks and governments to function.

Instead, this system relies on Blockchain and smart contracts (Blockchain programming codes) to keep itself running and store user data securely within DApps , the decentralized applications.