It’s not a stretch to say that the very idea of money is taken for granted these days! The fact that we exchange bits of paper for various goods and services is seen as a fact of life, one that seems to have existed since time immemorial. But the truth is that money as we know it only works because everybody believes in it. The authority that banks possess would be nothing if the people themselves wouldn’t be fine with receiving bits of paper for their efforts.
What started out as a relatively straightforward attempt to get everybody on the same page in terms of payment via currencies has, however, been diverted into a global financial system that hurts more than it helps. In most places, putting your money in a bank offers less return than the rate of inflation, making the very idea of holding onto your money unproductive, which is exactly the goal of any society that relies on mass consumerism just to get by. Even worse, the current rate of national debt accumulation ensures that many nations will be in dire financial straits if things continue as they are, especially since central banks have every incentive to nurture this kind of debt-based society because they rarely have to deal with any kind of significant governmental oversight. One need only remember the global economic crisis of 2008, a meltdown of proportions that affected almost every currency and foreign exchange market, and one that could happen again as long as banks and other financial institutions are left to roam unregulated.
In this scenario, cryptocurrencies should and could be seen as a potential answer to many of the challenges presented by our current financial system. Bitcoin and other similar forms of digital money are often accused of not having any intrinsic value, but as we’ve mentioned earlier, the same could be said about fiat. The real reason why people are flocking towards cryptocurrencies is their underlining technology: the blockchain. This technology is basically a souped-up version of triple entry accounting, updated for the information age. The blockchain is an incorruptible digital ledger that records every possible transaction without being stored in any single location, thereby ensuring that fraud and manipulation cannot take place within the digital currency ecosystem. While it was originally designed for Bitcoin, this technology has been adopted and perfected by various other cryptocurrencies. By bringing everyone to the highest degrees of accountability, the blockchain eliminates both human and machine errors, and can be the basis of a truly transparent financial system.
This is not to say that the crypto-world doesn’t still face considerable challenges on its way to mass adoption. Its association with the less savory parts of the dark web is a given considering the anonymity aspect of Bitcoin and other currencies. Moreover, the ease with which such assets can be bought and traded has given rise to a massive market for speculators, who profit from the market’s volatility while scaring off more conservative investors. And for now, it must be said that the use of Bitcoin and other digital assets is still fairly limited, although things are changing at a rapid pace. With the rise of Big Data, cryptocurrency prices may become more predictable and less volatile, which in turn will encourage more long-term investment and may even attract partners at a governmental level. This may also help pass any regulatory hurdles that still stand in the way of mass adoption. While some may argue that the very beauty behind Bitcoin and the like is the fact that they are unregulated and decentralized, for many people security and stability are important factors, ones that will determine the popularity of cryptocurrencies going forward.
All in all, it’s clear to see that the current global financial system is in a state of stasis if not outright crisis, and that steps will need to be taken in order to address its shortcomings. While it’s no silver bullet, the blockchain and its assorted cryptocurrencies offer a different way of looking at things, one that’s more consistent with the values of democracy and capitalism, and something that may just prove to be our ticket out of this self-made mess.