8. Cryptocurrencies vs fiat money, which will win?
Since ancient times, money has been the universal means of exchange for goods and commodities. It has taken different forms – metals, gold, leather, or even grain. Throughout history, we can see its evolution – from coins and banknotes to electronic records in the banking system. The creation of money was and is a task belonging to the government. At the end of the 20th century, when the financial crisis was growing, movements that have set the goal of creating a monetary unit that is independent of third parties have emerged. It was the beginning of cryptocurrencies and decentralized exchanges. Today, some of them have been legally regulated and serve as a means of exchange for goods and services.
The birth of Bitcoin and the greatest evolution of money
The birth of Bitcoin on January 3, 2009, represents the greatest evolution of money until now. We have always viewed money as something physical, tangible, but Bitcoin changed all of that. While we have had digital money for a long time (in our bank accounts or PayPal), the truth is that these systems were yet another representation of the same model, fiat money, to which we were already accustomed.
Bitcoin, on the other hand, is something entirely new. A system whose value is given by the work put into generating and running the system, in addition to the trust and supply and demand dynamics that its users impose. That is, here there are no central banks, no government to control it. Bitcoin is autonomous in every way.
Central Bank Digital Currencies (CBDC)
Right now we are facing a new monetary revolution and we have the privilege of living through it. For several millennia, money was something tangible, and now we have transformed it into a digital entity where there are no boundaries or restrictions on what we can do with it. Anyone might think it’s a matter of passing trends, but now even central banks themselves have realized their mistake of rejecting technology and remaining anchored to dull systems. Central Bank Digital Currencies (CBDC) are a way to digitize money backed by technology like blockchain. Bitcoin, on the other hand, is absolute freedom, the materialized spirit of those who always seek to respect your privacy and earn honest, transparent and democratic money.
Are cryptocurrencies and fiat money the same thing?
Cryptocurrencies are money insofar as they allow exchange between two parties and act as a store of value. However, they also offer features that the traditional monetary system is currently unable to offer: cryptocurrencies can be spent and received by anyone, anywhere, anytime, around the world and without the need for a bank or government. This is the most revolutionary part of cryptocurrencies.
Furthermore, fiat money essentially equals debt. When a central bank issues bills, it simultaneously issues you, the consumer, a percentage of your government’s debt. How is that, you might logically ask? Consider how the EU and the United States, for example, create money.
Most of the money the government creates comes from borrowing. Banks create money when people borrow money. Take the U.S. dollar, for example: if no loans were made, there probably wouldn’t be any dollars in circulation either.
While fiat money seems to derive most of its value from debt, this is not the case with Bitcoin. Bitcoin has inherent value beyond the trust of its community. Bitcoin is not based on a system of debt; its value comes down to how efficient it is as a medium of exchange.
It is only a matter of time before currencies will become widely accepted and even more trustworthy. Regarding functionality, they already match the classic view of the monetary system. The time has come for them to be regulated by law. The evolution of digital assets as a full-fledged means of payment is inevitable. The uncertainty that has been present in traditional markets for some time now is tipping the balance towards cryptocurrencies. The system behind Bitcoin is completely transparent and based on the mathematics and actual consensus of the everyday user. With all this in mind, which option is better for our future? Bitcoin or fiat?
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