As the cryptocurrencies increase in popularity and their demand grows, we start asking ourselves a question – is dollar collapse near? Will fiat currencies be replaced with cryptocurrencies within our lifetime? Should I start investing into a cryptocurrency? To find the answer, let’s examine some facts about the differences between traditional and alternative methods of payment.
No matter where in the world you live in, you need food, water, shelter and most of the cases money to pay for it. Nearly half of every transaction worldwide involves money in exchange for goods or services.
Everything that has these 4 characteristic:
- Easily recognizable
- Divisible – can be cut into smaller pieces
- Fungible – can substitute one piece for another of equal value
- Portable – carried around without trouble
can be used as a commodity money. In ancient Rome it was salt, the Aztecs used cocoa beans and shells were widely used in Africa and China. Grains, fish, leather, metals, ivory – if it had those four characteristics of commodity money, it could be used as currency.
Money arises naturally, as markets begin to develop. It has never originated from governments. Centuries ago, coins were an objective and universal unit of accounting and they allowed people to sell and buy over vast regions. The market economy was born and with it coins.
Power of Money
We spend most of our lives chasing after money, in order to make a living and accomplish our dreams. But it’s also an instrument of destruction. The existing banking system pocket enormous value from society and is hence parasitic in nature. Money is so ingrown to our society and global economy, but yet its true nature remains a mystery to most.
The problem with traditional money is that nobody really knows how many of them are in existence. Central banks and federal reserves can print as much money as they want. And when they do that, it makes our euros, dollars or yens worth much less, it’s called devaluation of money!
The banks create extra money to boost the economy on the short term and then try to pull it back before the inflation heats up. But nobody knows how much money banks create to boost their profits from questionable loans. Is there an alternative to that? What if a technological innovation allowed anyone to become their own bank and create a currency free from taxes and banking fees?
There are some people who want change the financial world and get rid of your dollars, your euros, your yens and transform every penny you have into ones and zeros – digital currency, entrusted to the web which spread across the globe. The Internet money, called also cryptocurrency.
Our world today is definitely in great need of a decentralized payment system such as cryptocurrencies. Cryptocurrencies are a subset of digital currencies, which currently used outside existing banking and governmental institutions and are exchanged over the Internet.
Although these decentralized models of currency exchange are still in the early stages of development, they have already proven that they have the potential to challenge existing systems of currency and payments.
Threat Of Cryptocurrencies
Both central bank government representatives have recently stated that cryptocurrencies pose a significant threat to central banks’ ability to influence the price of credit for the world economy. The inherent anonymity of cryptocurrencies make it even more difficult for statistical agencies to gather data on economic activity, key information which is used by governments to control the economy.
Decentralized cryptocurrencies are produced cooperatively by the entire system, it’s rate is determined by supply and demand and is publicly known. Total amount of any given cryptocurrency cannot be changed, therefore it is impossible to create more coins and hence influence its value. Additionally all the transactions that occur through the use and exchange of these cryptocurrencies, also called altcoins are completely independent from formal banking systems.
In centralized banking and economic systems, governments or corporate boards have the total supply of currency under their control and can print additional units of traditional money or demand additions to digital banking ledgers. It means that a single decision made by government or financial board has a great impact on everyone’s finances.
As people slowly realize the advantages of cryptocurrency, the trade in altcoins is becoming more popular. People start to value decentralization, the low entry barriers and the transparency will be just some of the reasons to draw people towards alternative methods of payment. This is bound to create a loss of consumer’s interest and confidence in fiat currencies.
Bitcoin is the complete opposite. It’s totally transparent and you know exactly how many exists and all the transactions are publicly visible. The computer code behind Bitcoin has a built-in brake pedal, cutting the creation of Bitcoins in half every four years as it matures. This ensures the transparency and ultimately limits the number of Bitcoins to 21 million.
Altcurrencies have all their own characteristics, but all share some common factors, one of the being that the final amount of the currency is programmed in at the moment of it’s creation. No lobbyist, no politician, no banker can create more or change the mathematical rules dictating their creation.
Cryptocurrencies are said to be anonymous. It means that this model of exchange is complex and in some cases impossible to track. Cryptocurrencies can be used as money and can be used to purchase goods and services, pay for individual living expenses, and exchanged for conventional currencies without leaving a trace on your account. In summary, your preferences and habits stay secret and cannot be used by international corporations as a source of your personal information.
Every currency gains its value as the number of its users is increasing. The popularity of a certain currency is connected with that currency’s success, this is true for US dollar as well.
It’s kept stable by many different types of means, such as fiscal policies and centralized decisions about interest rates. Stability of traditional money can only be achieved through some forms of centralization, in the case of US dollar by the federal reserve system.
Value of cryptocurrencies is determined by supply and demand. When demand for certain digital currencies increases, the price also increases and when its demand falls, the price falls as well. There is only a limited number of given cryptocurrency’s coins in circulation and new ones are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable.
When comparing cryptocurrencies to fiat money, the most significant difference is, how nobody can influence on the production of money. The interest rates and fees you may have to pay on your bank account or credit card, do not affect your cryptocurrency. As a matter of fact, digital currencies are, in some ways, a rebellion against banking fees. Digital currencies give you a sense of freedom and liberty, which cannot be achieved with traditional money.
So will dollar collapse? Will the cryptocurrency replace fiat currency? It surely will take a big part of financial market an will be used as commonly as traditional money. The widespread use of cryptocurrency is a matter of next few years as it offers people advantages, fiat currencies will never be able to.
Is Cryptocurrency Ready For Takeover?
Cryptocurrency, a programmable money, is the potential curse on bankers and government economical policies. There’s nothing big banks or politicians can do to stop its victory march. Cryptocurrencies are raking every government’s grip on money supply. What the Internet did for information, cryptocurrency is doing for the money.
This takeover is going to change the economic culture. Businesses have jumped to the new profitable markets both feet, ignoring the potential risks, as more and more experts said that in fact, the risks are non-existing! The ultimate power of cryptocurrency is unleashed by mainstream adoption and ever-growing value of transactions.
Troubling market data from minor countries spooked the markets all over the world and several countries fiat currencies collapsed. Rumors spread really fast in the financial world and cause even more chaos. These bad news rattled the housing prices at the heart of financial world.
Several major banks became insolvent and some were jailed for fraud. Investors and businesses made a run to other banks, demanding cash deposits. The largest financial institutions in the center of the modern world were frozen, assets were ceased, banks were closed, and credit crunch threatened the world’s economy. In the end the government stepped in to stop the collapse of the mighty US dollar.The largest bank bail-out ever.
Fiat Currencies Death Is Nearing
The same way the current political insecurity in US, following the Presidential election results, is fluctuating the dollar rate and shaking the worlds economy. Can the dollar be saved for the second time, or is the era of the mightiest currency in todays economy nearing its end?
The history of money is as old as the civilization itself. Currency is a language that allows us to express transactional value between people trading for items or services. It’s the technology is older than wheel and fire. People invent currencies, when they have no other currencies. And now they invent digital currency, it is here to stay.