In a world where fiat money is used everyday to buy goods and services, can cryptocurrency be the future of money or can they coexist with each other in the market? Right now, digital assets are starting to gain popularity because of their advanced technology that ensures convenient and secure transactions.
In a recent crypto survey conducted by Fintech experts, 54% of the panel predict that Bitcoin will overtake fiat money in the global finance industry by 2050. The term used to describe it is called ‘hyperbitcoinization’ and some of them even see it happening as soon as 2035 as more people, countries and businesses begin adopting it.
The most notable example is El Salvador, the smallest country in Central America, which will be the first country to use Bitcoin as legal tender. Aside from that, big economic players like PayPal and Facebook are also delving into cryptocurrency—a rising trend among businesses nowadays.
With all of these developments, this begs the question: can cryptocurrency be the main method of payment in a world where fiat reigns supreme? Find out here at BTC Post.
What is Fiat Money?
Fiat is the traditional payment method most people are familiar with. These are the physical cash and coins that you can use to purchase goods and services in their respective countries. It is regulated by the government and it doesn’t have any intrinsic value.
Pros of Fiat
It’s more accessible
As of today, fiat is more accessible than cryptos since it is still what people widely use to buy goods and services. Not everyone owns cryptocurrency and there are limited merchants that accept it as a mode of payment.
People regularly earn money through jobs, businesses and investments. It’s much more adaptable and versatile than cryptocurrency because it’s not and will never be scarce as long as there are banks or central institutions that regulate it.
It’s universally recognized
Fiat money is universally used. This means that stores, supermarkets, groceries or any other merchants will post the items they are selling in fiat (dollars, pounds, yen, etc.) People will immediately understand and recognize them as opposed to cryptocurrency values.
Cons of fiat
Governments can produce it anytime
Having unlimited access to something is never good. The government can produce money anytime and as much as needed. Having an infinite supply of money makes it prone to hyperinflation. This is what happens when the government overproduces money to the point that it devalues.
Because the government has control over the money supply, they can manage economic variables such as:
- Interest rates
- Credit supply
- Money velocity.
Transferring them is a hassle
Sending fiat can take a long time, especially with cross-border transactions since various requirements have to be processed before they are approved. This also means that transaction fees and international exchange rates are expensive. Sometimes these fees will be nearly as much as the amount that you’re trying to send which can be frustrating.
It can be faked
Fiat currency can be faked or counterfeited easily. If the vendor/merchant isn’t alert enough or if they’re unaware of illegitimate notes, they can easily be tricked into thinking that counterfeit money is real.
What is cryptocurrency?
Similar to fiat, digital assets are currencies that can be used as a medium of exchange to purchase goods and services. What makes cryptocurrency different from fiat is its use of ‘blockchain’ and ‘cryptography’ technology in every transaction.
The blockchain is an important factor that makes cryptocurrencies function without the need for a central authority. This is because it is entirely controlled by code and mathematical functions which eliminates the role of middlemen.
In essence, blockchains are decentralized public ledgers where people’s transactions are recorded. The pieces of information that are gathered in every blockchain includes the sender, receiver and the amount of coin being transferred. Once these have been recorded in the ledger, it is permanent and cannot be altered.
Pros of cryptocurrency
Minimal transaction fees
Paying using cryptocurrencies eliminates the presence of middlemen since it uses a peer-to-peer network that doesn’t require permission and involvement of banks and the government. This means that there will be less red tape, which can lessen transaction fees that need to be paid by the sender or receiver.
Fast transaction rates
One of the main selling points of cryptocurrencies is their rapid transaction rates. It is much faster and hassle-free than the usual transfer services of banks. Transfers using cryptocurrencies only take seconds to a few minutes.
It’s impossible to tamper with
As was established earlier, each transaction made using cryptocurrencies is impossible to alter thanks to its hashing and blockchain technology. Blockchain also acts as a timestamp where every transaction is recorded. This prevents ‘double spending’ or an instance when a transaction is mistakenly done twice.
Cons of cryptocurrency
The price easily fluctuates
Investing in cryptocurrency can be risky because it’s highly volatile. This means that their value can either go up which can give huge returns, or go down which can lead to large losses. This is why some investors and companies are still hesitant to invest in cryptocurrency.
It’s not that widely accepted yet
Every store and merchant that you go to will 100% accept fiat currency. The same can’t be said for cryptocurrencies as this method of payment is still not widely accepted. There are only a limited number of stores online or in real life where cryptocurrency is accepted as a payment method.
What the future holds for both currencies
As of today, cryptocurrencies might already be well-known to the public, however, not everyone uses them. This may be because people are still thinking twice about whether or not this form of currency is a legitimate method of payment and investment. Some may not be familiar with its concepts or the price is not affordable.
Regardless of the reason, one thing is for sure: cryptocurrencies have a high chance of overtaking fiat money as the main method of payment in the future. If it keeps up the pace it has right now, it won’t be long until people realize that this currency is worth taking the risk.
Bitcoin (BTC) $ 17,002.14 1.45%
Ethereum (ETH) $ 1,259.00 2.51%
Tether (USDT) $ 0.999933 0.08%
BNB (BNB) $ 288.83 1.96%
USD Coin (USDC) $ 0.999631 0.12%
Binance USD (BUSD) $ 0.999788 0.01%
XRP (XRP) $ 0.386553 1.84%
Dogecoin (DOGE) $ 0.100982 5.26%
Cardano (ADA) $ 0.317299 2.92%
Polygon (MATIC) $ 0.910282 2.66%
Expand your knowledge and invest in the cryptocurrency industry.