Some analysts predict that big changes are ahead for the crypto industry. Among them there is the idea that cryptocurrencies can completely replace cash.
Possible advantages for the cryptocurrency future
Since the beginning of the cryptocurrency boom, Bitcoin has been the undisputed leader. Up until today, it accounts for the vast majority of the industry’s market capitalization. Although the BTC is still in the lead, some analysts are debating whether the crypt is really a currency, and what its future is.
The Futurism report highlights some of the possible outcomes if cryptocurrencies outperform Fiat currencies at some point in the future. One important consideration is that cryptocurrencies cannot be manipulated as easily as fiat currencies, mainly due to their decentralized and unregulated status.
In addition, crypto assets can better support the concept of a universal basic income than Fiat currencies. In fact, some programs have already experimented with using cryptocurrencies as a means of distributing universal basic income.
In addition, cryptocurrencies can help get rid of intermediaries in everyday transactions. This could reduce costs for businesses and help consumers.
The report also highlights possible problems in case crypto replaces cash. Of course, we should pay tribute, as some serious problems have been raised. It says:
“If crypto assets outpace cash in terms of usage, traditional currencies will lose value without any legal remedies. New infrastructure will need to be developed so that the world can adapt. There will inevitably be difficulties with the transition, as cash can become illiquid quite quickly, causing some people to lose their savings. Traditional financial institutions may need to change their financial policies and systems as soon as possible.
In addition to the impact of the future of cryptocurrencies on individual consumers and financial institutions, governments themselves will suffer. Government control of Central currencies is key to regulation in many ways, and cryptocurrencies will operate with much less power.”
Regardless of how individual crypto investors and enthusiasts might feel about the prospect of switching from standard cash to cryptocurrencies, it is most likely not in their hands.
Is this the case?
In many articles, Bitcoin and cryptocurrencies rise above Fiat money. They also hint at the inferiority of traditional hard currencies and suggest that these currencies may become obsolete and disappear in the near future.
“Fiat’s death is imminent,” they say. Well, even if it seems likely, you need to ask yourself: “Can this be true?”
It is not known what your answer would be, but it is very doubtful that the days of paper money are coming to an end, and whether cryptocurrencies are suitable to replace Fiat, especially given the current state of the crypto space.
Only half of the way is covered.
Blockchain technology and cryptocurrency have been thriving for many years. You can easily name a few revolutionary innovations that first emerged from blockchain and cryptocurrency technology. The FinTech sector has already undeniably felt the arrival of cryptocurrencies and blockchain technology more than any other sector. The ambitious dream of cryptographic and digital replacement of Fiat currencies is being pushed by smart inventions of blockchain and cryptocurrency projects that are considered “superior” to existing alternatives.
The recent trend of countries and well-known firms using blockchain technology in certain sectors, including Finance, has caused an enthusiastic attitude of people who represent a world without Fiat and a world in which currencies running on blockchain are a common means of exchanging resources. Cryptocurrencies have shown flashes of potential to make this possible. But each solution has its own problems.
The fiat system and countless violations
“Unregulated” inflation has eroded the value of Fiat currencies. Political dishonesty also made a big contribution. Custodial financial institutions have demonstrated inefficiency, from systemic to technical. Centralization itself is becoming unacceptable for the majority of the younger generation, and for the older generation as well.
Blockchain and cryptocurrency technology offers solutions to most of these problems. But how close is cryptocurrency to replacing the fiat system? Not so close. At least, not in the way most crypto enthusiasts think.
As a supporter of Bitcoin and cryptocurrencies, it’s hard to ignore some of the masterpieces of Fiat currencies and the current shortcomings of the crypt. According to some cryptographers, ” Blockchain is a smart technology, but cryptocurrencies are useless.” This is, of course, largely incorrect, but it mostly expresses concern about certain aspects of cryptocurrencies.
While the technology that supports these flexible currencies has many applications, cryptocurrencies largely exhibit some flaws and violations that are very difficult to ignore.
The fact is that no system or technology is 100% effective. What are the chances of a very young potentially promising innovation that has demonstrated its enormous level of efficiency, compared to a system that has served (albeit poorly) for centuries? They are great if you correct all the errors and shortcomings, and prepare for the fact that it may take too much time.
Food for thought: how well do you think cryptocurrencies will perform as a global medium of exchange? Critical thinking will reveal many problems that may arise from this. These problems can no doubt be fixed, but cryptocurrencies and blockchain technology are still far from solving these problems.
Cryptocurrency is better to use as a token than as a global currency that is used for key exchange. If you need to use a crypt for this purpose, you will inevitably need a small, but centralization. Centralization negates the entire goal of ” decentralizing and disabling intermediaries to improve the security and confidentiality of the transfer process.” This will leave us at a level similar to what we are at now, and what Central banks are offering us, with their CBDCs.
The majority of cryptocurrencies makes it difficult to achieve a decent throughput of transactions. This is a common problem with blockchain that restricts the use of cryptocurrencies in daily “spending” activities.
Optimization of spending and receiving algorithms puts the blockchain project “head and shoulders above others”. Modern blockchains can handle the transfer and receipt of assets, but users still face significant limitations when using this feature. Difficulties in using the blockchain arise due to the complex steps required before sending a transfer request.
Conditionally, blockchains also showed a low transaction processing speed and a high Commission (just look at the commissions of the Ethereum network). To better serve people, optimal ways of spending money are needed. Cryptocurrency and blockchain technology are still a bit far from the promised optimization.
Talk about portability?
Of course! Modern digital banking technologies are focused on providing a portable means of financial transactions. The recent surge in the number of banking applications system for the application of bar code and other banking services through the Internet has made banking very flexible. This simplified financial activities and created a kind of “digital fiat” that works without a blockchain (and in a centralized system). Of course, this is a flexible spending system with some rules that try to control its use and block non-normative actions.
Financial technologies have simplified certain management procedures, and have a source.
Well, the blockchain claims to be transparent. And that’s a fact, regarding the custodian of the banking systems. But transparency is just a tool that helps regulate. However, using a transparent system without any means of eliminating irregularities makes all this useless. If you see unprincipled actions but can’t stop or reduce them, transparency is almost useless.
This is the case in a truly decentralized financial system based on blockchain. Any step to change this is very familiar to us – centralization.
At the same time, the universality and “limitlessness” of cryptocurrencies is the only attractive feature that they really have in comparison with the current Fiat financial system and banks. With the current instability, manipulation, and technological flaws, they are essentially inferior to Fiat currencies and existing banking.
Get used to the banknotes, they will linger for much longer
Using cryptocurrencies as utility tokens for blockchain projects that solve some real-world problems is probably the biggest utility for cryptocurrencies at present, and in the near future. The introduction of certain aspects of blockchain technology in FINTECH and the revolution in the financial system, in order to incorporate some of the advantages of blockchain technology, will undoubtedly create a more efficient financial eco-structure.
The Fiat system may never die, but if blockchain technology and cryptocurrencies choose a healthier path, and fix some of their biggest problems, then it has a chance to penetrate the mainstream financial system, but not completely replace the Fiat one. Replacing a Fiat currency with a cryptocurrency may remain an illusion if these problems are not solved. And the complete rejection of paper funds will lead to one thing-a complete loss of financial freedom. Here is a paradox.