The reason many a cryptocurrency trading exists is that they are looking beyond the hype. There isn’t any particular problem raised right now that cannot be successfully solved. People seem to overlook the fact that cryptocurrencies emerged from a culture of cryptoanarchy, not from governments or economists.
Even though transactions, surrounding trading on various crypto trading platforms tend to be slow and expensive, difficult to scale, and prone to congestion, the ledger technologies associated with it holds a lot of promise.
Our Existing Payment and Monetary System
The tried and trusted way to instill confidence in money is through an independent centralized bank. This would imply agreed upon goals that involve financial objectives and clear monetary policies, democratic accountability, and administrative independence to secure broad-based support from a political perspective. Independent central banks managed to achieve their purpose of safeguarding our society’s political and economic interest with what is considered to be a stable currency. As a result, money can be defined as something indispensable that is backed by an institution that enjoys the trust of the public at large.
Almost all our modern-day economies provide money through one or the other joint public and private venture that exists between private and central banks, where the latter would be at the system’s core.
What is more, electronic deposits would be at the order of the day and form part of the primary means of payment between various users. Central bank reserves serve as payment between different banks. Through their two-tied payment processes, trust is created through accountable and independent central banks. They back their reserves utilizing asset holdings. Trust in bank deposits stems from supervision, regulation, and insurance schemes, which emanates from the state.
Further to this, the central banks ensure any payments made run smoothly while they see to it that the reserves supplied respond according to shifting demand.
Cryptocurrency, on the other hand, is seen as an elusive promise of decentralized trust.
Do cryptocurrencies and the exchange that accompany them deliver on their promises? Will they just turn out to be short-lived curiosities in the end? We need to gain an understanding of the associated economic limitations to answer this question better.
Would You Consider Cryptocurrencies as New Petals?
Crypto coins want to be respected as a new type of currency and promise to hold up to its vision of providing value and stability through technology. They are made up of three different elements.
The first of these would be a host of rules in that specific computer codes would be in place to indicate how users need to transact.
Secondly, they would utilize a secure ledger to record and store transactions.
Thirdly, decentralized networks that are in place to update read and store the ledger of transactions that follow a set protocol of rules.
By following these elements, they claim that cryptocurrencies are not subject to the so-called misguided incentives offered by sovereigns and banks.
Regarding the money flower taxonomy, cryptocurrencies have put together three main features:
- The first of these take on a digital format that aspired to serve as a convenient way to make payments that rely on cryptography to avoid fraudulent transactions from taking place and counterfeiting.
- Second of all, even though it was set up privately, no one is held liable in that the currencies cannot be redeemed. The value they represent is derived from the mere fact that others would continue to accept it as a form of payment. This way, it is similar to commodity monies.
- Third of all, it makes provision for a digital peer-to-peer exchange.
How Does Cryptocurrency Compare to Private Digital Monies?
As opposed to private digital money in the form of bank deposits, cryptocurrencies make use of the digital peer-to-peer exchange. Without a doubt, digital bank accounts have been around for many years.
Did you know that privately used “virtual currencies” have been used extensively during multiplayer games such as World of Warcraft, which predated cryptocurrencies by more than ten years?
However, crypto transfers take place within a decentralized setting without any central party being needed to make the exchange happen.
Because of this, digital currencies such as Bitcoin can confidently offer a convenient payment method that is solely based on digital technology, which is a model we can trust.