The Future Of Currency and Crypto
What do you think of when I say the word - currency?
You might think of currency notes, coins, digital wallets and maybe even the newest member of the family, cryptocurrency.
But what actually is the true essence of the meaning of a currency?
Currency by its very meaning should indicate a medium through which one can transact goods and services in exchange for said currency at a given value determined by the worth of the product or service as well as the worth of the currency through which the transaction is being made.
The conventional mediums of currency such as banknotes and coins encapsulate the essence of currency pretty well. But things get interesting when we start to think about the future of money.
Cryptocurrencies were introduced as the medium of currency to take over the world ruled by fiat money and lead humanity into the future with what seems to be a futuristic currency. Operating on a blockchain network, this ‘currency’ appeared to be a promising option for the future. After all, it provides a scope for decentralisation and an escape from the overbearing control by the governments on the currencies of their countries.
But where does it all seem to fall apart?
Recall what we discussed when we talked about the essence of currency. The utility of a currency is only as good as the convenience it provides when transactions are made. Cryptocurrencies take care of one part of the convenience of a transaction purely because of their digital nature. It provides a hassle-free way of transferring money from one user to another. But here’s where cryptocurrency falls short in its attempt to provide a convenient transaction.
Like we talked about earlier, transactions take place based on the value of a good/service as well as the worth of the medium of currency. The latter part of this statement is here crypto fails to prove its practicality. A medium that has drastic changes in its value with every tick or every second, cannot be used as a reliable tool for carrying out transactions. The high volatility in its nature is what makes crypto a bad bet as the future of currency.
There are plenty of other factors that make crypto a highly unreliable and unrealistic medium to function as the future of currency. I won’t be going into them in this post because the reasons mentioned above prove to be enough of a reason to disregard the possibility of cryptocurrencies becoming the future of money.
So what does the future of money look like?
Short answer, we don’t have much of an idea
I can however provide my thoughts on what the future looks like:
An important aspect of something becoming a currency is also its acceptability. If a medium is not accepted by a lot of people, it becomes worthless to them which creates an imbalance when it comes to making transactions in such a society.
Drawing some assumption from this, we can assume that the future of money is not decentralized. The idea of centralisation bothers a lot of people mainly because of the idea of giving control of a major part of the functioning of the society to a select group of people. People look to decentralisation to overcome this issue. However, centralization has its benefits. It provides accountability and therefore provides reliability. Meaning that you know exactly who is responsible for the worth of currency in your pockets. Centralization also solves the problem of acceptability to a high degree by incorporating the legal system with the currencies and actively making a particular medium of currency a legal tender.
The future of money is still digital, however, it must be centralized, unlike cryptocurrencies in order to provide a stable and reliable financial system within a society.
The debate of anonymity of transactions still seems to be up for debate. But centralization is one thing that cannot be compromised.
The world of finance is changing rapidly with newer fintech solutions coming up every day. Only time will tell what the future looks like. All we can do now is speculate.
