The demand for digital money among people is growing by leaps and bounds. Can cryptocurrencies become a real replacement for traditional fiat money? Let’s try to figure out and understand what advantages the new type of finance has.
In 2021, cryptocurrencies have an insanely wide public interest. The best proof is the Gemini research exchange. According to research, 14% of Americans are already crypto investors, and another 63% are actively interested in a possible purchase. Does the hype have a real background? Experts are trying to solve this question.
Monetary instruments
Fiat is a global and the only one type of finance within the state. Traditional money is used in everyday life, taxation, and so on. Cryptocurrencies are deprived of many opportunities as long as fiat’s individuality remains. They will be risky until people understand financial literacy and information technology for a long time. As long as cryptocurrencies are pitted against fiat currencies, volatility will be significant.
Most national currencies are stable. At least this applies to the major world economies. Reliability is determined by the guarantees of the state and the fact that a particular currency is mandatory for use on the territory of a particular state. Perhaps a cryptocurrency with fiat capabilities will appear in the future, but so far this state of affairs is unrealizable.
But fiat has a number of problems. Traditional money is non-anonymous, prone to inflation, and states can track transactions and the lack of full control by the owner is also worth mentioning, because any account can be frozen.
Benefits of cryptocurrencies
Why are cryptocurrencies so good? The transaction speed is much higher and each transaction costs less. For cryptocurrencies, state borders are not barriers, and the owner of digital assets cannot lose their money by the decision of another person. There is no analogue of the risk of freezing money in a bank account. Crypto anonymity is one of the fundamental aspects of the issue.
Cryptocurrency is a new word for the economy, where financial services will work according to fundamentally new models. The influence of central banks and regulators is becoming negligible in this equation.
Entry threshold
Cryptocurrency savings are growing. Ordinary people do it without sophisticated wallets, buy cryptocurrencies and store them on reliable exchanges. The threshold for entering the crypto market is getting lower. A reliable cryptocurrency wallet can be installed on your phone today. Such applications will soon be equated with mobile banking.
Becoming a member of the crypto community is easier than entering the stock market, for example. However, the requirements for IT literacy for the user are higher here, and this problem needs to be addressed in order to increase the impact of digital money.
It is important that cryptocurrencies provide the owner with incommensurable opportunities, but the responsibility is also growing. All errors in sending or loss of passwords from the wallet are borne by the owner, and only.
Will cryptocurrency replace fiat?
Fiat is not leaving us for the foreseeable future. States will not abandon it overnight. Almost all financial instruments and structures in the world are developed for fiat funds. Disaster consequences will lead any try to refuse them. To be honest, it is not even possible to try. And the authorities of the countries will not agree to erasing borders, so as not to lose leverage over ordinary citizens. The first thing that can happen is the issuance of cryptocurrencies by central banks. However, this will not be decentralized money.
