The Cryptocurrencies may be generating many headlines and interests, but there is also skepticism about them and if they will ever become a legitimate form of currency.
But are the Cryptocurrencies useful? What can we do with them? And will they be as usable as fiduciary currencies? There are several factors that will drive the use of Cryptocurrencies as an alternative to fiduciary currencies. And, some transactions that we are seeing today point to what problems the Cryptocurrencies can solve and how they will go from being a tool used by a small niche of technology experts and from very rich to the mainstream.
Transactions that are considered high-risk for credit card companies and, therefore, are not allowed on traditional systems, discover that Cryptocurrencies transactions are a convenient tool for exchanging Articles. These are legal goods, such as medical marijuana in the United States, are difficult to buy on traditional financial services. And these are the areas where the Cryptocurrency is beginning to make incursions.
The same applies to some international transactions in which it is legal to make a purchase, but the financial instruments based on the fiduciary currency cannot be used for regulatory reasons. "How do you use online cash-based systems that cannot cross the banks of the bank? Crypto is actually happening, "said Barker.
For example, Barker said an increasingly common scenario is that Chinese investors buy properties in the Middle East. In particular, parties seeking to "invest" properties quickly find that this is very difficult through the traditional banking system. Then, while the transaction is legal, it is kept out of government books, becoming what Barker called a "grey market" transaction. What does all this tell us? There is a place for Cryptocurrency in modern commerce.
t the beginning of the cryptocurrency boom, Bitcoin seemed to be the unquestioned leader. Up until early this year, Bitcoin accounted for the vast majority of the industry’s market capitalization; then, in a span of just weeks, Ethereum, Ripple, and other currencies rushed to catch up. While Bitcoin is still in the lead, the rapid turnover in the industry has some analysts debating if cryptocurrencies are actually currencies. Some are predicting that even bigger changes could be ahead. Among them? The idea that cryptocurrencies could come to replace cash entirely.
Possible Advantages to a Cryptocurrency Future
A report by Futurism highlights some of the possible outcomes, should cryptocurrencies surpass fiat currencies at some point in the future. One important consideration is that cryptocurrencies cannot be manipulated quite as easily as fiat currency, largely due to their decentralized and unregulated status. Beyond that, cryptocurrencies could better support the concept of a universal basic income than fiat currencies would. As a matter of fact, some programs have already experimented with the use of cryptocurrencies as means of distributing a universal basic income.
Further, cryptocurrencies could help to get rid of intermediaries in everyday transactions. This could cut costs for businesses and help out consumers.
Possible Concerns if Cryptocurrencies Replace Cash
Of course, there are also some huge challenges and concerns with this scenario. If cryptocurrencies outpace cash in terms of usage, traditional currencies will lose value without any means of recourse. Should cryptocurrencies take over entirely, new infrastructure would have to be developed in order to allow the world to adapt. There would inevitably be difficulties with the transition, as cash could become incompatible quite quickly, leaving some people with lost assets. Established financial institutions would likely have to scramble to change their ways.
It is important to note that while the initial Bitcoin-mania saw quite a few businesses offer to accept the cryptocurrency, that list has steadily dwindled bringing back the skepticism about its use a medium of exchange.
Beyond the impact of a cryptocurrency future on individual consumers and on financial institutions, governments themselves would suffer. Governmental control over central currencies is key to regulation in many ways, and cryptocurrencies would operate with much less government purview. Governments could no longer, for example, determine how much of a currency to print in response to external and internal pressures. Rather, the generation of new coins or tokens would be dependent upon independent mining operations.
Regardless of how individual investors may feel about the prospect of a switch from standard cash to cryptocurrencies, it is likely out of anyone’s hands. Of course, with ample speculation abounding that the cryptocurrency industry is a bubble that is destined to pop, it’s also possible that predictions of a crypto future could be overblown. What is difficult for investors is that, as with all things crypto-related, changes happen incredibly quickly, and predicting them is always tough
Read more: Investopedia
Can Bitcoin or any other cryptocurrency actually work as money?
Most buyers of cryptocurrency are betting that the price of whichever “coin” they buy will increase in value dramatically. However, the ultimate aim of many digital currencies is not to remain a highly volatile asset for speculative investors but to offer a viable decentralized alternative to the current system of money.
Most will not reach this goal. Some lack the technical ability to process enough transactions, all remain highly volatile, and there are then both legislative and psychological barriers in their way. There is also a huge amount of competition.
Garrick Hileman, who holds positions at the London School of Economics and University of Cambridge and specializes in monetary systems, said there was a significant difference between currency and money.
“Many things in blockchain land meet the definition of currency,” he said. "Cryptocurrencies such as Bitcoin and Litecoin do function as a medium of exchange, as you can buy things with them [although relatively few retailers accept them]. They do store value from day to day, although they are very volatile and the fact that they can lose value so rapidly is a major question mark."
For something to become money, he argued, requires it to take over as “the unit of account”, in addition to functioning as a medium of exchange and storing value. The unit of account is the unit in which goods and services are priced in a certain country, such as the pound in Britain.
Mr. Hileman said this was where cryptocurrencies “really fall down”.
“The unit of account sets how we think about money – most people don’t like to think in more than one currency,” he said.
“Some argue that this makes it very difficult for new currencies to become money, putting aside all the technical issues and volatility. There are then institutions such as central banks that are very keen to keep control of the unit of account, to maintain the monetary policy.”
However, he added that in the future “the dominant user of currency may not be people”.