”Money is not coin and banknotes. Money is anything that people are willing to use in order to represent systematically the value of other things for the purpose of exchanging goods and services.” Sapiens (2011) by Yuval Noah Harari
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| Source: https://hackernoon.com/the-cryptocurrency-trading-bible-43d0c57e3fe6 |
Cryptocurrencies had a wild run in 2017. The most popular digital currency (Bitcoin) has risen more
than 16x and altcoins as much as 100x in value. Blockchain technology became a hot topic in mainstream media and attracted both common people and big investors (Soros, Rothschilds and Rockefeller families). However, I don’t want to write about bitcoin as an investment but rather focus on whether it can fit into current financial system.
One of the main concern is the digital aspect of cryptocurrencies. However many people are not aware that banknotes and coins are actually a rare form of money. It is calculated that the total sum of money is about $60 trillion while total sum of material cash is less than $6 trillion. It means that more than 90% of global funds exists solely in digital form as entries in databases.
The second leading concern is that cryptocurrencies do not have any value on their own.
While this may be true, the entirety of the current finance industry is based on the assumptions of price,
of supply and demand, and not of intrinsic value. So where does currency get its value from? Many people believe it is from gold supplies but it is not entirely true. Chris Mayer has written a great article where he explains that money value actually comes from tax credit. A piece of paper only has value because governments accepts it as payment. Just take a look at polish zloty. Despite not being backed by gold, it still has a value because Polish government’s existence supports it. And essentially every other modern currency is government-backed. Without this regulation there’s nothing stopping the citizens from using something that could serve as a better store of value (e.g. necessities or commodities).
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| Source: http://www.usagold.com/publications/feb2013newsletter.html |
So can we consider cryptocurrencies to be money? Theoretically, yes. We could use Bitcoin or Ethereum in the same way we use traditional money. After all, on a very basic level, money is a social construct. Nonetheless, social acceptance is not enough. In order for something to actually be money, political approval is vital. Money in the sense of currency is tied to governments. This means that money as currency functions only if both individual people and countries agree that money is money.
Cryptocurrencies are considered by many as digital gold. Whether they will succeed or not is still uncertain. They exist in a wild and unregulated environment and only time can tell if the society will adopt them.
If you are interested in how cryptocurrency work here is a video with a good explanation.
Sources:
1. https://cointelegraph.com/news/is-cryptocurrency-real-money-brief-discussion-on-major-issues-surrounding-debate
2. https://hackernoon.com/is-bitcoin-money-ea6495809515
3. https://blockgeeks.com/guides/what-is-bitcoin/
4. https://erenow.com/common/sapiensbriefhistory/47.html
Questions:
1. Are you familiar with any cryptocurrency project other than bitcoin?
2. Do you think that cryptocurrencies can become real money?
3. Should governments support cryptocurrencies?
1. Did you hear about cryptocurrencies before?
ReplyDelete- Yes. It's really, really hard to not have heard about it. Although, currently it's slighlty less hot topic that it was before.
2. Do you think that cryptocurrencies can become real money?
- I doubt it. I'm not saying it will vanish in the future, but I'm saying it won't be publicly accepted and only after such an acceptance I'd consider it as real money.
3. Should governments support cryptocurrencies?
- Not supporting cryptocurrencies sounds like saying no to easy money. Cryptocurrencies give a way to increase public budget, so why not? If they won't support it, they are the only ones who lose, because even without their support the cryptocurencies will still exist.
I edited the first question because your answer made me realize how naive it was. I also share your opinion that cryptocurrencies can exists even without government's support.
Delete1.Yeah, i've heard about it. I'm mining Monero myself (as a Proof of Concept on my solar powered Raspberry Pi, not to earn any substantial amount)
ReplyDelete2. They already kind of are, quite a lot of stores accept Bitcoin as a payment method (https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/)
3. It's complicated. If you want to be government independent it should not be supported by any official government part. But getting supported might convince more companies that cryptocurrencies are staying and will be more and more widespread with time.
What are the results so far for your proof of concept? Personally I really hate how much electricity is wasted on crypto so mining with solar powered Raspeberry Pi sounds interesting to me.
DeleteBecause it is really old RPi i get about 1H/s so quite poor but it works :) it shuts down for the night when it drains too much battery power but during day it works just fine
Delete1. Yes, I bought IOTA cryptocurrency. It is connected with Internet of things stuff.
ReplyDelete2. It cannot be real money because you cannot couch it. But I think that in the future you will pay with cryptocurrencies in groceries.
3. The idea of cryptocurrencies was simple - no governments. Unfortunately they will want to control it to receive taxes
This comment has been removed by the author.
DeleteThere are already some groceries in US and Japan where you can pay with cryptocurrencies! :)
DeleteI’m not familiar with any cryptocurrency project other than bitcoin. What is more I’m not familiar with project called bitcoin. Only think I know is fact that there is something like cryptocurrency called bitcoin. I’m completely over the idea of being part of this event. I love to pay for stuff by electronic way so I’m a big fun on nine payments but I can’t understand the whole think about cryptocurrency. Now, there is no way for cryptocurrencies to become real money. It is very messy and there is no way to take control over it now but I think there is a chance to change that. I hope there is some chance. Cash is a very uncomfortable way to pay daily. Governments should support cryptocurrencies if there will be available for people and will be a normal way of being. I can’t imagine how the world will be crazy if people will pay by cryptocurrencies without any standards.
ReplyDeleteYes, I agree with you. In current state there is no way that cryptocurrencies could be accepted as real money. However once the market will mature I believe that we will be able to incorporate them to our daily life.
Delete1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteNot really, I know that there is a lot of other cryptocurrencies but I was never interested enough in mining cryptocurrencies to research them. But after watching a video from the link I become interested in the technical side of this issue.
2. Do you think that cryptocurrencies can become real money?
Yes, to be honest, I think it already is/was real money because you could buy legally with it or exchange it for real money. I have a feeling that it's not a fad, that cryptocurrencies will accompany us in regular life in nearby future.
3. Should governments support cryptocurrencies?
Even if the government will not find cryptocurrencies as real money, they will still exist. I think governments finally will support them because it can be another source of money, and cryptocurrencies will prosper well and be in the game for a long time.
I think that the technical side is the most interesting thing especially for us. Blockchain can be use to create distributed cloud storage. Another usage is to prove ownership. Items that are purchased could be tracked on the blockchain to prevent the sale of stolen goods.
Delete1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteSure, I know a few. One of the oldest besides Bitcoin is Litecoin, which obviously didn't get as much attention.
Since it's very hard to "mine" Bitcoin now, Etherum became the biggest point of interest.
2. Do you think that cryptocurrencies can become real money?
As you've mentioned, everything that has a value, can be considered as money. I think that better question would be, if so-called "cryptos" could become a real currencies. I think that it's not the case, because the price of Bitcoin and altcoins is too unpredictable.
3. Should governments support cryptocurrencies?
Hell no!
Some companies even has stopped accepting crypto payments because of price drastic changes. There were even some bugs in Bitcoin payments that affected users purchases. It is still a young market, after all.
Delete1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteNo, Bitcoin was the only one I heard about. That said, it was huge in my area. Manny colleagues invested in it to potentially earn some money.
2. Do you think that cryptocurrencies can become real money?
I don’t think so. It doesn’t physically exist as in paper or gold or other kind. It can be virtually used for transactions to pay instead of real money.
3. Should governments support cryptocurrencies?
I think that government should do this. It lets people to have more control and security over his digital money. Its value can change dramastically and so it is more interesting to invest, at least to me.
High price fluctuations is indeed appealing. So many investors have jumped od bitcoin hype train and I am really curious how it will turn out.
DeleteThe cryptocurrencies are a very hot topic. Recently, I've been to GeeCON conference in Kraków. It is a conference for IT specialists and the cryptocurrencies were wildly discussed there. I would like to invest in cryptocurrencies but I believe they can be manipulated by banks or rich states. I believe that cryptocurrencies should become an accepted form of money. Governments should support cryptocurrencies, but first they would need to have some economic incentive to do so.
ReplyDeleteIt's nice to hear that you attended GeeCON! I thought it's mainly Java related event, through? Why was crypto discussed there?
DeleteI read about many cryptocurrencies. Everybody can make own currency based on ethereum. This looks great, but value of this unpopular currency is very low. This type of payments is great but only for that is supplement a real coin. The biggest advantage is that crypto is not related with any politicians in any countries. Independence is important. I think that we should have credits and savings with currency in which we earn.
ReplyDeleteI believe that politicians and governments will sooner or later get involved with cryptocurrencies. They will either ban it or regulate it. It's too much money to just ignore it.
DeleteAre you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteI usually hear about bitcoins because many of my friends and colleagues bought one or a few of them in 2017. Some of them even earned a lot of money that way. I have also heard about Ethereum and Litecoin, but I have to admit I was never particularly interested in the topic, so I only have a basic knowledge.
Do you think that cryptocurrencies can become real money?
I believe the chances are they will become real money sooner than we expect.
Should governments support cryptocurrencies?
I honestly don't know what to think about it. I'm not an expert in finances, and I'd rather listen to one than deliver naive opinions myself.
I heard about bitcoin. Many technology journalists are constantly looking at this topic.Part of people use cryptocurrency earn on investment in cryptocurrencies.
ReplyDeleteIn my opinion it could be it is possible that cryptocurrencies function as real money. Although introducing them to the market can be quite a challenge.
It's hard to say, however i think it will be better for people, if governments will support cryptocurrencies.
1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteNothing, i’m completly out of this type of buissnes.
2. Do you think that cryptocurrencies can become real money?
One day Why not, but for now it’s just a small type of spreading money buissnes
3. Should governments support cryptocurrencies?
I think that they start to support it when they full that they can earn money on it.
Even if you are not interested in cryptocurrencies i encourage you to take a look at blockchain technology. It might impact many IT branches in near future.
DeleteThere are a lot of crypto currencies right now because of blockchain hype. I think that many of them will fail leaving their users quite angry. I've heard about a lot of other like Etherum or Dascoin for example.
ReplyDeleteAs many people above stated - you can pay with Bitcoin.. so it'a a real money. Governments shouldn't involve.
My favorite project connected to this topic is: maidsafes disturbed networkL https://blog.maidsafe.net/2016/06/23/introduction-technical-overview-of-safe-consensus/
I also think that majority of crypto coins will disappear. I am actually a bit sad that you put Ethereum and Dascoin in one sentence. The first one is the biggest working crypto network while the second one is most likely a scam.
DeleteI’ve also heard about Lite Coin. But that's all. I think that cryptocurrency can became the real money, but i prefer to make it happens when it’s became more stable. Maybe support form governments make its possible but i'm not the expert in that domain so it's only my first thoughts.
ReplyDelete1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteYes, I have heard about many different cryptocurrencies, after bitcoin probably the most popular are ethereum, litecoin, dogecoin.
2. Do you think that cryptocurrencies can become real money?
I do not think so. Currently, in the bitcoin network, the confirmation of the transaction is so long, that it becomes useless, eg in everyday shopping.
3. Should governments support cryptocurrencies?
They should not, although I think that in this form (financial bubble) cryptocurrencies will not survive, but I hope that an alternative will emerge.
1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDelete2. Do you think that cryptocurrencies can become real money?
3. Should governments support cryptocurrencies?
1. I am not familiar even with the bitcoin xD
2. I really don't know. I am an engineer, not an economist :P
3. I don't know either. If it is profitable, then maybe yes.
1. Are you familiar with any cryptocurrency project other than bitcoin?
ReplyDeleteYes I'm familiar with Zcash, Ethereum. But they are all bitcoin dependent so it's better to track bitcoin changes because after bitcoin drops, all of them drop.
2. Do you think that cryptocurrencies can become real money?
I don't think that banks will ever make this possible. They are too powerful and they have too much power in governments all over the world.
3. Should governments support cryptocurrencies?
Yes, why not. If anyone on this world needs something, he/she will find a way to obtain it.
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