Money In The Modern Age
Cryptocurrency still faces a number of barriers to its mainstream adoption, some of which are more legitimate than others. The largest, and arguably most difficult of these to overcome, is a lack of understanding around what crypto ‘is’. However, this question prompts a closer look at how fiat money works and whether its legitimacy is still suitable for a digital age.
What value does cryptocurrency have?
Cryptocurrency, and the underlying ‘blockchain’ technology upon which it is founded, has no real value in itself. This lack of intrinsic worth has presented itself as a major barrier to cryptocurrency’s success in achieving mainstream adoption since its inception 10 years ago. However, when looking at how blockchain works in practice, it becomes clear that it actually offers more value than fiat currency.
For many consumers, the concept of cryptocurrency and its underlying blockchain technology is little understood and technically complex. The idea that a ledger, backed by technology, could form the basis for a legitimate rival to fiat currency is hard to accept, and many of these reservations center around the fact that the bitcoin is not backed by anything.
However, a brief look at the history of money tells us that once the gold standard was ‘dropped’, money didn’t have any source of real value to back it either. As a result, the faith that we place in fiat currency is arbitrary, having achieved legitimacy through the passage of time. Cryptocurrency, on the other hand, has the potential to become a truly global ecosystem on its own, which is arguably more fit for the modern, digitally-native age.
How is crypto inherently valuable?
The blockchain technology that underpins cryptocurrency can bring clear benefits to a financial ecosystem in a way that fiat currency simply can’t. For a start, its decentralized ledger allows for an ecosystem that is not affected by traditional economic theories.
While it is true that cryptocurrency has experienced volatility since its inception, as the market moves closer to a regulated state and institutional investment continues to grow, this will likely stabilize. Once this happens, the concerns of the public will likely phase out, helped by real business use cases of crypto that demonstrate how it can add value.
The digital economy seems the most obvious ecosystem to support crypto’s widespread adoption. The gaming industry already has millions of users that comprehend the value of virtual currency, so this could be the trigger that crypto needs to enter the mainstream.
A wave of distrust towards monetary institutions, ignited by the Lehman crisis, means that a new financial ecosystem that sits ‘above’ ordinary market fluctuations is sorely needed. As the number of ‘digitally native’ consumers continues to grow, the legacy that has upheld fiat currency and afforded it unquestioned legitimacy is no longer relevant for the digital age. A dencentralized, encrypted ledger that creates a trusted system to build the new world economy is clearly the way forward. It just needs to be given the legitimacy it deserves.