Cryptocurrency is a concept that has floated around the online world for a few years now and has recently gained mainstream popularity. The technical term is Decentralized Digital Currency (DDC), which is an online currency that is not regulated through a government body or bank. This definition is at the core of the argument for why cryptocurrency really matters. The hope here from those who back crypto is that this currency will replace government-backed currency and use crypto for commerce.
Some may believe that money is not real, as since we left the gold standard (where each dollar is based on a fixed quantity of gold), the money we use is just a fictitious number backed by the United States Government. Instead, with crypto, the value is derived by the people rather than the government. Except for the problem here is that traditional money is not actually fake. Any currency that is not based on gold has to be based on something. Today, currency is based on work (time + effort). Granted, a lot of money is being earned by individuals who are not doing that work, but a stable government and ability to stabilize supply and demand backs the very reason we would associate work with a dollar . Meanwhile, DDC’s value comes from nothing; it can be earned through computations that are ultimately meaningless except for creating cryptocurrencies; nothing is based on work.
Okay, but the value is supposed to be derived by the people, meaning we could make it as valuable as we want it to be, right? Well, technically, yes, the hope here from the people who believed in crypto was that people would want to place their assets into crypto because of governmental instability. Inflation would cause the value of crypto to go up, and people would want to transition because it would not be tied to the U.S. inflation rate. However, the problem here is that this has not happened. Inflation rates are high, and if you look at cryptocurrency, those values are the definition of unstable. The stability problem has a solution that is almost impossible to meet. This solution would be every American buying and paying for actual, legal goods with one type of cryptocurrency. Paradoxically, this will not happen because legal businesses will not accept an unstable/speculative coin. Therefore it will not be stable because legal goods cannot be bought, due to the fact that legal businesses will not accept an unstable/speculative coin. Right now, the main use for crypto is to buy illegal goods on the dark web or for payments that some do not want a record of on their credit card history. However, these purchases are not enough to back this currency; only through legitimate, everyday commerce.
Some may , “well, companies like Subway and Tesla allow bitcoin payments.” Yes, that is true, but these companies expect that when they accept these coins, their value will rise up so they can be sold for real money. It seems that companies are just taking advantage of the situation rather than actually pushing for a new currency. Not only that, but cryptocurrencies are a lot more susceptible to manipulation than the currency of today simply because of the lack of regulation. An example of this is when Elon Musk started to promote both and , inflating their prices, but he sold all of his crypto assets as soon as it shot up. Now, if this was stock, Elon would be in major trouble with the FCC, but you are free to manipulate cryptocurrencies since they are not regulated.
So, is crypto the future? The simple answer is no:
1. It’s derived from nothing, and there is nothing to back it up.
2. The instability of these currencies is nearly impossible to make them stable for legal everyday commerce.
3. Because of the lack of regulation on behalf of governance, these cryptocurrencies can easily be manipulated, with one being equivalent to gold and then the next day being worth next to nothing.
What seems more likely is a new technology called a Central Bank Digital Currency, which is completely different from the concept of the Decentralized Digital Currency, but that is a topic for another day.
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