Can Crypto Be the End of Currencies as We Know it?

In Blog, National Security
November 17, 2021
Ramsha Qamar
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Emerging from the barter system, money has taken hold of all aspects of our lives. It controls every transaction made by us. Being almost as old as trade itself, money is a permanent feature of the world now. Although, never been questioned before as the norm, there is a change materializing with a new type

Emerging from the barter system, money has taken hold of all aspects of our lives. It controls every transaction made by us. Being almost as old as trade itself, money is a permanent feature of the world now. Although, never been questioned before as the norm, there is a change materializing with a new type of currency: cryptocurrency.

Cryptocurrency emerged for the first time in 2009 as a response to the 2008 economic recession. Crypto is a digital currency based on decentralized networks that work using blockchain technology. It is distributed in isolation from all banks and governments and so cannot be influenced or disturbed by any external authority.

Multiple factors, such as foreign exchange reserves and a state’s debts play a part in the fluctuation of a currency. Cryptocurrency, on the other hand, is valued by the trust and value that people hold for it. Steadily, cryptocurrencies have now begun to instil a certain trust in the public. This, in particular, stems from the fact that cryptocurrency values cannot be easily controlled or influenced by the state due to its decentralization. Many have stated to feel more at peace knowing that their hard-earned money is separated from their state’s control. However, the decentralization of cryptocurrencies from central banks comes with certain disadvantages. For example, the value of cryptocurrencies can easily be influenced by the slightest of economic shocks and even the mere interest of people like Mark Zuckerberg and Elon Musk.

Whereas some people are willing to experiment and take a chance with cryptocurrencies, many others are hesitant to do so as they believe that cryptocurrencies are untrustworthy and scams. This reluctance is partially due to the quick rise and fall of many fraudulent cryptocurrencies. Numerous crypto cons have surfaced, following the success of Bitcoin and Ethereum, to attract beginners willing to. Recently, the creation of a cryptocurrency inspired by the popular show on Netflix, ‘Squid Game’, deceived many out of their money.

The world of crypto is still often misunderstood by many, including economists and investors. Cryptocurrencies have neither shown much stabilization nor are they operating to their full potential in real life. Many functions that were expected to be possible through crypto have yet not been made a reality, such as making transactions through companies that approve of cryptocurrencies. Rather than using crypto as a method of payment, many investors, have bought cryptocurrencies as a means of growing their wealth faster than by investing in the stock market. They are simply holding down these digital currencies in the hopes of their value increasing.

It goes beyond a doubt that digital currency is the future of the world. But it may not be in the form of cryptocurrencies. The rise of cryptocurrencies has got governments in a state of panic around the world. The competition they are facing now due to crypto was never thought to be a real threat until recently. As a result, states are now introducing digital currencies in hopes of counter-attacking crypto. Many platforms already exist that facilitate the function of an electronic wallet, such as PayPal, Google Pay and PayTM.

As many currencies, such as the Dollar, Pound and Euro are currently in a strongly stabilized condition, the creation of centralized digital currencies can potentially grow very quickly. And since the primary purpose of cryptocurrencies was to enable people to carry out international transactions much quicker and safely, these functions are the potential elements that governments around the world need to analyse deeply and consider providing their citizens with.

For now, the answer seems to be that fiat currencies and cryptocurrencies need to coexist and complement one another. An excellent example recently rose in the form of El Salvador. El Salvador is the first country to recognize Bitcoin as its legal tender. It is also providing small businesses to opt for transactions through Bitcoin. The example of El Salvador is surely to have a domino effect on to other states, potentially Ecuador, as both these countries have used dollar as their currency for over 20 years.

The president of El Salvador has stated that a balance between cryptocurrencies and the dollar needs to be maintained as dollar is a stable global currency. However, he has also stated that crypto can facilitate in the growth of El Salvador’s wealth. He has argued that the use of Visa, MasterCard and other platforms will continue while maintaining the use of the dollar.

While the world is moving towards a more digitalized era, people still need to develop trust in cryptocurrencies. Some individuals are still shy of the technological advancements that have recently emerged on the globe, while others are looking forward to becoming part of the change. Nonetheless, money has always transformed with time and will continue to do so, and crypto and digital currencies will certainly be a part of that.