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I have read a lot about cryptocurrency and am yet to find a good explanation of why the technology does or even might someday provide an improvement over the current monetary system.

So, what is the technological problem that cryptocurrency solves? How does overcoming that technological problem help in the real world?

Please offer answers that don't already have known solutions. For example:

  • Inflation already has a good solution - a responsible monetary policy that controls the money supply.
  • Problems with international transfers are (in my view) solved by modern services like Wise.
kennyB
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If you earn your money by selling drugs online or hacking computer systems for ransom money, cryptocurrency is a safer (but not 100 percent secure) way to get paid than other alternatives.

thieupepijn
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The other answer describes how bitcoin solves the technological problem of trustless payment. The real world applications are when this trust is absent. There are two main situations where this trust is missing:

  1. Where payment processors do not trust the individual. For various reasons some people are unable to access payment cards. For such people cryptocurrency may be the only way to make remote payments.
  2. Where the individual does not trust the payment processor, in particular does not trust the payment processor to keep their details private. Generally to use payment processor systems you are required to identify yourself, and they will on request provide this information to state level organisations. If one is involved in fields of commerce not sanctioned by the state this can be a problem, and cryptocurrency use is a solution.

It is worth noting that bitcoin has features that make it sub optimal for these purposes, and other cryptocurrencies may be more suitable. But bitcoin was the first and still works for many people.

kennyB
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Dave
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What is the technological problem that cryptocurrency solves?

According to the abstract of Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto:

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.

Bitcoin implemented a novel solution (blockchain) to the double-spending problem of electronic cash without needing a trusted third-party.

Flux
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"Inflation already has a good solution - a responsible monetary policy that controls the money supply."

But this is not solvable by an individual. Some believe that central authorities are not solving this, so they desire an alternative way to solve it that doesn't depend on a central authority.

"Problems with international transfers are (in my view) solved by modern services like Wise."

Wise may not support all of the countries where you may want to send money, and as a centralized service it may not give you the autonomy or privacy you would like.

Other issues cryptocurrency is claimed to solve:

  • Privacy and anonymity (but not traceability) - Some individuals want to be able to conduct business without disclosing to 3rd parties the nature of that business
  • Autonomy - Some people want full control of their money so that they cannot be 'shut-off' as may be the case with centralized systems.
Michael
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