Since 2017, cryptocurrency has become a buzzword that seems to be on everyone’s lips. Some call it a scam while others call it the future. Love it or hate it, you can’t ignore it. The crypto market saw unprecedented growth last year. It raised the question: can it replace the traditional money? There are strong arguments both in favour and against. Let’s take a better look and see if crypto holds the key to the future of money.
Why Could Cryptocurrency Be the Future of Money?
There are many features of crypto that support the argument that it could provide the future of money, such as:
· Credibility Where It Counts:
In some countries like Zimbabwe and Venezuela, cryptocurrency has found amazing success. The reason is not their small economy, but rather a failed one. In these nations, their economies were under significant fiscal pressure and were undergoing hyperinflation. Amidst this chaos, crypto came in as source for people to access flows of money which were resilient to these forces.
Being accessible on most digital devices and more stable than the hyper-inflated currency, crypto has demonstrated the potential to work in falling economies.
· Regulations Are Not a Thing:
The whole idea of decentralized currency was to have a medium of exchange that a single authority cannot regulate. The government cannot regulate its value. Nor can big corporations influence it. When you think in the larger picture, it does make sense. After all, shouldn’t the value of a currency depend solely upon the market and not anything else? In that respect, cryptocurrency exhibits the potential to be a valid currency of the future.
· Extremely Secure:
One of the things that make cryptocurrency desirable as a currency is its security. Due to it being based on the blockchain, transactions are highly secure and recorded in a publicly visible immutable ledger.
How does it correlate to our needs? The economy is increasingly becoming digital. Physical cash is getting substituted by digital cash. In the digital world, security is one of the primary concerns. And crypto stands out as a great solution, ready to serve.
Why Couldn’t Cryptocurrency Be the Future of Money?
Despite the promise cryptocurrency shows, it is exhibits problems. Some of these problems are solvable, while others are more difficult to tackle:
· Privacy – Too Much or Too Little:
Financial transactions are always concerned with privacy. After all, what goes in your wallet is one of those things that you may want to remain private. Crypto can ensure that, but critics argue a tad too much. The risk of being used for criminal intent is something governments have echoed time and again, According to some opponents, crypto transactions especially privacy coins such as Monero allow the coin to be used for crimes like terror funding and money laundering.
From my point of view, how much crime and money laundering is carried out with good old USD? I’m sure an interesting comparison would ensue.
· Too Volatile to Touch:
Cryptocurrency prices vary dramatically. While this looks good for trading, it is not so helpful when it comes to a currency. A currency is desired to be stable. We know what a dollar is worth today and it would likely be worth relatively similar tomorrow, next month and maybe even next year.
Conversely, the value of BTC might change considerably between the time you put something in your cart and the time you go to the payment counter. Not so helpful… Check my earlier post out on why the value of Bitcoin changes so much for further discussion.
Since the entire crypto market is currently driven through hype and speculation, it makes it inherently volatile.
As the space matures, this issue will become increasingly redundant, but for the short to medium term it’s here to stay.
· Not Fast Enough:
Making a cryptocurrency as an alternative to national currency means widespread use. Is bitcoin ready for it? Right now, BTC network can handle less than a dozen transactions per second. To put things in perspective, the VISA credit card network can handle about 65,000 transactions per second. The problem here is that of scalability. While other cryptocurrencies are certainly faster than BTC, they still have a long way to go before coming anywhere near the desired speed.
It seems that crypto, right now, isn’t strong enough to be considered a worthy replacement for fiat.
That being said, many issues regarding crypto are getting solved. The networks are getting faster and scalable, while privacy issues and security are developing. More regulation is being introduced so that cryptocurrencies are more accountable to their investors.
The primary issue going against crypto is its volatility. Since the entire crypto market is run right now on hype, it would be too much to expect that it will change anytime soon.
The importance of crypto for the future cannot be discarded. Crypto and blockchain have definitely opened new avenues for the world economy. The inherent features of crypto, like its decentralized and secure nature, remain its USP. And when it matures and realises it’s future potential, it is something that will surely play a significant role in the future of money.