Can Cryptocurrencies be the Future of Money?
Globally, cryptocurrency has been gaining recognition among citizens, however, it has continued to face stiff Government restrictions. This phenomenon threatens the possibility of it being considered as the future of Money.
The first step in determining the possibility of Cryptocurrencies as the future of money is to understand the terms “cryptocurrency” and “money”.
Cryptocurrency is a type of digital asset, which is a medium of exchange in different types of transactions using cryptography. On the other hand, money is simply described as a legal tender; a generally accepted means of exchange and measure of value.
Every time a form of innovation is introduced to manage the physical world, people become suspicious. Upon Marco Polo’s return from China in the year 1295, the Italian Merchant’s stories of people using paper representations of money in China, not metal, were discredited as sorcery. “How could slips of paper equal the value of a chicken?” They asked. It is not surprising that the emergence of cryptocurrencies has unleashed equal waves of fascination and skepticism.
The European world continued to resist representative money well into the 17th century. Later forms of derivative money, electronically transferred over wires and computer networks, also took time to be understood and accepted.
Cryptocurrencies were created to enable easy transfer of money by eliminating geographical boundaries. Numerous cryptocurrencies have been created over the past few years and now it is reported that over 3000 types of cryptocurrencies are being used around the globe. Some of the most popular cryptocurrencies are Bitcoin (BTC), Ethereum (ETH), BNB, etc.
This new cryptocurrency system provides information, reduces costs, and adds value to transactions between who owns what. Creating consensus without a central actor is also a profound evolution of the social contract. The very consequence of this new system allows economic agents to discover the potential in new types of assets, whether that be digitized land titles, credit systems for consuming music, payment flows between Internet of Things devices, user data on the internet, or even electrons traded between solar panels.
Given the frequent currency fluctuation, especially in Africa, Cryptocurrency has been discovered to serve as a form of protection against currency devaluation, thereby enabling business and individuals to thrive. The existing realities of the COVID-19 pandemic on global economies have further made investors resort to crypto-assets to check against the risks attached to stocks and bonds.
Coinbase’s highly successful IPO on April 14 2021 marks a turning point in the markets’ perception of cryptocurrencies, it strengthens the credibility of the cryptocurrency phenomenon, and has helped reduce the fear of Cryptocurrencies being described as “something the government may ban tomorrow”.
Reports of Chinese mobile suppliers requesting to be paid in cryptocurrency, in order to ensure speedy payment and convenience serves as the metaphorical “light at the end of the tunnel” for some. This shift has significantly boosted Organisation’s profit margin due to the stoppage of using the domiciled currency to purchase dollars. This and many others serve as a positive pointer to the possibility of Cryptocurrency being the future of Money.
However, as a relatively new invention, cryptocurrencies have up to now largely escape National, Regional and Continental regulations. In order to gain full mainstream attention, this must be addressed. The rationale for regulation must factor in the adoption of synchronisation of domiciled currencies and cryptocurrencies in a way that will not bring about economic shocks.
In developed countries, this will enable government agencies and banks to attest to your identity or behaviour. While In the less developed regions, people without persistent portable identification; such as internally displaced persons (IDPs) or refugees will have a new identity construct that can be attested to. If they are forced to leave their country, they can still make purchases or get micro-loans and bootstrap their businesses. Integrated systems invite the creation of a larger network where the potential to increase capital increases in orders of magnitude proportional to the number of users who connect to them. Giving developing countries access to this technology, therefore, will help raise the whole system, not just the unbanked.
