Does the rise in crypto popularity spell the end for cash?
Money. We all need it and, to some degree, we all have it. As we have often heard ‘Money makes the world go round’ and the reality is that we need it to survive. The thing is, how we view money has undergone a dramatic transformation. In recent memory, there was no choice other than to walk into an actual bank and request a withdrawal over the counter. Fast forward just a few decades and the norm is that we are all making payments and transactions from our own homes with just a smartphone.
Technology has always been a driving factor behind change. What technology is leading to now is a financial revolution. While physical banks, and even physical money, are relied upon less and less, there is coming a time when traditional banking methods just won’t suffice anymore. If you’re interested in where we’ve come from, in terms of money, and where we’re heading then read on.
The traditional approach
When looking back at the origins of banking, this was about the trading of physical assets in exchange for goods and services. Often the assets in question were gold and silver as these were amongst the most valuable. The problem with holding on to such valuable assets was the risk of theft. It was too easy for someone to come along and simply take what was yours. So, in stepped the banks to provide a solution.
Banks offered to hold onto assets and to ensure that they were kept safe and secure. In return, the owner of the assets would be given a note that confirmed how much was being held by the bank. These notes went on to be known as cash.
Society has undergone numerous changes since this all began, but little changed with the banking system. Even with electronic payment methods (debit cards/online transactions), the principles remained the same. Banks controlled money and could circulate it as they wished. Often transactions were slow and saw individuals facing high fees for the privilege.
A new way
It was back in 2008 that the white paper from Satoshi Nakamoto was released. Within a year, Bitcoin had become a reality, although it would be another year until it was used to make a transaction. While bitcoin is credited as being the first cryptocurrency, the reality is that this wasn’t a new idea at the time. As far back as 1995, James Orlin Grabbe told us that cryptography represented the future of money and banking. It just took time for the technology to catch up.
As cryptocurrency has developed, how we view money and transactions has changed. It raises questions about the traditional banking system where there is a lack of control. With crypto, we are given a greater degree of autonomy, transparency, and access to a range of financial services.
What is meant by cryptocurrency?
While it may be clear that cryptocurrency may offer a ways forward, shifting away from the traditional banking system, it may be that some people are unclear as to what crypto actually is. In its simplest form, it is easy to think of as a digital version of cash. It does not exist in any physical form and it is not issued by banks or governments. It is secured by cryptography in a decentralised worldwide network.
Whereas with traditional methods, banks hold and store money, those who use cryptocurrency can send money directly to each other, peer to peer. This bypasses banks and other financial institutions. Every transaction is recorded on the blockchain which is effectively a shared ledger. The fact that the ledger is shared increases the level of security. Should one computer stop working for any reason, the data will always exist on the remaining network.
What are the different types of crypto?
The best-known crypto is bitcoin. This was the first crypto released, back in 2009, and is the one that has achieved the highest value. In November 2021, it reached a value of $68,000. This level is phenomenal given that the very first bitcoin transaction saw pizzas being bought for 10,000 bitcoin!
Other cryptos have emerged since. There are meme coins such as Dogecoin and Shibu Inu that have remained at relatively low values. Other, more established cryptos include the likes of Etheruem, Solana, and Litecoin. These are often referred to as altcoins meaning that they are an alternative to Bitcoin.
It is estimated that there are over 16,000 other cryptos in existence. These all come with their own designs, unique features, and benefits. With crypto still being in its infancy, the reality is that there are likely to be more players entering the market.
Time to leave cash behind?
Cash has often had its own issues. On a basic level, the problem is that it is a physical asset. Just like any other physical asset, it can be lost or stolen. The main issue with cash is the fact that it is too easily controlled by governments and banks. These institutions have direct control over how much cash exists as well as how much it is worth. Their actions can trigger inflation that sees cash becoming near-worthless in extreme cases.
Crypto is not controlled by a single person or institution. Its value is based on what people are prepared to pay for it and so is driven by demand. It is much harder to corrupt or manipulate the asset. This makes it the perfect replacement for cash going forward.
Crypto becomes mainstream
Looking back to when Bitcoin was first launched, it was a thing for mathematicians. Geeks even. It wasn’t something that the everyday man or woman on the street understood or could see a practical purpose for. This is something that has dramatically changed.
Tesla recently allowed Bitcoin to be used to buy its cars. This acceptance was only short-lived after Elon Musk voiced environmental concerns.That being said, Tesla still holds a significant amount of Bitcoin. PayPal has also entered the arena making it easier than ever to use crypto. There are numerous online retailers that now accept crypto too. The rate of crypto adoption means that it now has a place in all of our lives and this is only set to increase in the future.