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Is cryptocurrency a genuine threat to fiat currency

by John Saunders
10th Aug 20 10:33 am

Many organisations are accepting cryptocurrency. People all over the globe are trading in cryptocurrencies on various platforms like the Bitcoin up. This is because there are many advantages of using digital currency, and experts speculate that it can take over eventually. Let’s take a look at what will happen if crypto takes over:

Consumer interest

In 2017, there was a massive rise in consumer interest that led to the Bitcoin rally. People from across the world were interested in this new currency and wanted to buy, mine, and sell it. The massive surge in demand resulted in a rise in Bitcoin’s price. The value of currencies depends on how valuable people consider them to be. Hence, cryptocurrency can only become a stable currency when consumers’ interest increases, and they start adopting it more. If the consumer interest does not grow, cryptocurrencies can never become a stable currency.

Impact on various industries

With time, it is being observed that more businesses are accepting Bitcoin and other types of cryptocurrency as a form of payment. If consumer interest keeps growing, more companies will start receiving them soon. With digital currency, online shopping will get better, and gradually physical stores will have to start accepting it to stay in the competition. Industries such as finance will incline more towards crypto-oriented services and products.

Impact on Government

Given the control over centralised currency, Governments will always want to keep fiat currency active. This direct control over fiat currency has a significant impact on the country’s economy. Many countries like China do not want to give this control away and are entirely denouncing the idea of cryptocurrencies. However, if consumer interest in cryptocurrencies keeps growing, governments will have no other option but to acknowledge the country’s currency and allow people to trade.

Adoption within a country

Adopting cryptocurrency is a huge step. This is when the majority of the population uses cryptocurrency freely without restrictions. And the government has many policies for trading in cryptocurrencies. Once a government understands the various advantages of adopting cryptocurrency, it will start developing plans to change the entire fiat system to a digital one.

International adoption

Cryptocurrencies will be accepted globally, but it will take time. As more and more countries understand the benefits of adopting this digital currency, they will be moving towards a digital system. Eventually, we will have an international system that ultimately depends on one particular currency.

What are the advantages of having an all-crypto future?

Many experts suggest that an all-crypto future will be good. Let’s take a look at the possibilities:

Decentralised currency

One of the top benefits of using cryptocurrency is that it is a decentralised currency. The cryptosystem depends on how a group of users manages the system in a complex and interconnected network. Neither government will not have any control over this system, nor any person.

Cannot be manipulated

Unlike fiat currency, there is no chance of manipulating cryptocurrency. Hyperinflation is always a possibility when too much money is printed. Depending on the trading volume, the price of small-cap stocks can be managed. In the case of cryptocurrencies, such tactics cannot be used as they are immune to it.

Circulation costs

Often, the cost of creating money is more than its value. While creating fiat currency, there is a considerable expense required for printing and mining new currency and managing currencies that are old. As cryptocurrency is a digital currency, there is no such expense associated with it.

Safety and security

Cryptocurrencies depend on blockchain technology to ensure that every transaction made is legitimate. Unlike traditional currency, all purchases made in cryptocurrencies will be recorded, and the data can never be manipulated. There is no way that one can guarantee so much safety and security with fiat currency.

Eliminating the middleman

When direct crypto transactions take place, some financial intermediaries can be eliminated from the process. This means that consumers will not have to pay extra transaction fees. Also, the chances of payment processing faster are higher.

The points mentioned above make it quite apparent that cryptocurrency can completely take over fiat currency. It may take years or even decades for that to happen. There will be several steps that need to be accomplished.

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.

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