The answers to this are not straightforward and many of them are still heavily debated today.
The prevalence of cryptocurrency around the world today is now starting to stir plenty of discussion on the future of fiat currencies. From a starting point of only a small minority having full confidence in the idea, the likes of Bitcoin can now be considered mainstream.
More Similar than Different
To begin, let’s look at what the similarities are. Contrary to what popular opinion is, both forms of currency derive value from their popularity. Take the US dollar, for example, as the most widely used currency in the world, it has long been considered the safest vehicle to store capital in because people have confidence in it.On the other hand, the Zimbabwean dollar was so poorly thought of only 15 years ago that a single unit ended up worth 1025 ZWD in only a few years. Yes, that’s 10 with 25 zeros on the end!
Bitcoin is the same. From people calling it a crank, niche idea, people are now plowing much of their net worth into it both as an investment and for convenient spending.
The point about spending is also becoming more relevant as time moves on. In the early years of cryptocurrency all that could really be done was to exchange from coin to fiat currency, now many retail outlets are accepting Bitcoin and the more major altcoins. The online world has also integrated cryptocurrency seamlessly to the point where its usage is actually now expected.
Decentralised
Cryptocurrency isn’t regulated by any government or central authority. And so the argument goes that it is less credible and has no intrinsic value. But whether this is true or not, many will not accept this as the final word.In fact, for many cryptocurrency enthusiasts, no government or bank being involved is the most attractive detail. The blockchain technology promises security preventing theft and double spending as well as a long list of other potential uses for the future as the world becomes ever more digitised.
The greatest opportunity in all of this is that of financial inclusion. Many smaller countries have issues with unstable currencies which leads to problems with trading with the outside world. Cryptocurrency, even run by a government or major company, can solve many issues stemming from this type of problem.
Volatile
One major difference between cryptocurrency and fiat currency is the price volatility. If a currency like the US dollar or British pound experienced swings similar to what Bitcoin goes through there would be chaos.For investors this is actually a boon. Volatility is one of the drivers of profit potential but, of course, also loss potential. Those who embrace risk in order to seek out massive rewards in a short space of time love a market with high volatility. Whether this is better or not clearly depends on who is buying.
Transaction Fees
Anybody who has sent money around the world or exchanged fiat currencies in a bank will be aware of the sometimes exorbitant fees that banks charge. In recent times new companies have started to pop up undercutting the main players but transaction fees are still a huge issue today.Cryptocurrency has none of this exploitation from the banks and such, with a recent transaction of $5 million costing only a couple hundred dollars.
The Future of Cryptocurrency
Where the crypto world is heading right now isn’t clear. Heavy regulation might come in order to protect fiat currencies and the banks, but that isn’t a given. China has already gone the whole way and banned its use as well as even mining Bitcoin.Altcoins are now also starting to take a different approach, one that will be potentially mirrored by governments, and pegging the value to a major world currency. For those who fear the high volatility of Bitcoin, this will alleviate some fears and get more people into the crypto world in the future.
Even though so much has changed in the last decade, the industry is still in its infancy. The next decade will likely see even more change, but it does look certain that many more people will get on board. Crypto is growing fast and each new generation is likely to embrace it even stronger than the one before, it’s only natural.
The ball is in the government’s possession now. We await what their next move will be.
