May cryptocurrencies replace fiat money

During the last year, the Bitcoin virtual currency has become a refuge for capital and one of the most profitable (and risky) investments in the market right now.

The operation of this virtual currency is simple: through a system of encrypted keys, users who want Bitcoins can process them with their computers. Basically, they can make money. It is a slow and tedious method, but often profitable. This currency does not have a static value or is controlled by a Central Bank, as is the case with traditional currencies. Bitcoin has the value that users give it, based on supply and demand.

Given that there is a maximum number of Bitcoins that can be simultaneously in circulation (21 million coins) and its popularity is increasing (users increasingly demand more), the currency has been increasing its value steadily in recent years. months, although in the middle of this generalized rise there are lots of sudden ups and downs, which is ideal for the speculator and not so good for those who want to use it to trade.

Thus, a recent study from the Imperial University of London states that cryptocurrencies, especially Bitcoin (BTC), will become the substitute for fiat currencies within the next 10 years.

The study was carried out in collaboration with the E-bull exchange. Part of the analysis report also comes from the cooperation of professors William Knottenbelt and Dr. Zeynep Gurguc, who determined that both Bitcoin and ethereum already meet one of the highest criteria in financial concepts, which will establish them as currencies par excellence in the future, allowing users to use them as valuable stores.

Other factors to consider are its adaptability as a medium of exchange, either for products or services in the local and international market, as well as acting as a measure of value in terms of the economic system.

In order to comply with the missing requirements, cryptocurrencies must overcome the regulations and the scalability problem. In this sense, the researchers point out that:

“The world of cryptocurrencies is revolutionizing the market as fast as the considerable collection of confusing terminology that accompanies it. These decentralized technologies have the potential to alter everything we think we know about the nature of financial systems and financial assets. There is a lot of skepticism about cryptocurrencies and how they could become a daily payment system used by men in the street. In this research, we show that cryptocurrencies such as bitcoin have already made significant progress towards meeting the criteria to become a widely accepted payment method.”

Professor Knottenbelt also emphasized that:

“The broader use of cryptocurrencies as a form of daily payment is the natural progression if they successfully overcome the six challenges: scalability, usability, regulation, volatility, incentives and privacy.”

“Despite the obstacles present today, experts and supporters believe that it is not long before this succession comes to light, after all” the history of money is the history of evolution; the new technologies will replace the old ones.”

The biggest difference between Bitcoin and the euro is not that one has bills and coins and the other does not even physically exist, but regulation. The euro, like the dollar, the yen or the pound, is controlled by a Central Bank, in this case the European Central Bank. This control prevents the currency from fluctuating too much, making it easy to trade with it, having a stable price base.

Bitcoin is governed exclusively by the market, nobody controls it, so here the rules change. For a consumer it is essential to know if the money he has today will be worth more or less the same tomorrow, not so for those who speculate. Paying in Bitcoins is a good way to save money when buying things, but you need patience, luck and work. If the user buys 100 Bitcoins at one euro each and in five years its value has multiplied by 10, then paying with Bitcoins will allow you to get more goods at a price lower than what it would cost if you pay with euros.

However, the variation in the value of Bitcoins is so great that the user assumes a lot of risk because, as it increases, its value can be reduced.

Bitcoin is not a special case. Virtual currencies have been circulating among us for years, either in the form of points (such as those of airlines) or credits (such as Xbox points to buy online games). Any company is free to launch its own currency and is something that users have assumed for years. The difference between these companies and Bitcoin is that they control their currency and, therefore, its value, while in the case of Bitcoin, being decentralized, it depends exclusively on supply and demand.

It happens with the Amazon Coins, for example. The company grants a fixed value to its currency (100 AC = 1 $), and this ensures that its customers spend that money on their products, as it is not valid anywhere else. The success of Bitcoin is to grant absolute freedom to users and companies to trade between them, in addition to allowing anonymity in transactions.

This anonymity, however, can be a long-term problem. The US wants to regulate large transactions with Bitcoin to avoid money laundering, since any user can use this currency to hide illegal activities, as it is not subject to any regulation.

Historically, the Central Banks have been bothered by the existence of alternative currencies, such as those created in Bristol or Veracruz. The objective is to maintain a monopoly on the official currency to continue controlling the money market. However, this phenomenon is difficult to regulate since, in practice, anything can be considered money. It only needs that consumers accept it as a means of payment.

In these moments, Bitcoin is producing profits in a generalized way. Its popularity is increasing and the state of the world economy encourages to diversify the risk in this type of products. Right now there is great confidence that Bitcoin is a safe haven, and for that reason it increases its value. But if at any given time users lose confidence and people stop demanding Bitcoins, their value will plummet. Here there is no Central Bank that can mitigate that fall and the losses will be large. The question is how much you can pull the rubber before breaking it.

Since the invention of credit cards, ‘plastic money’ has become very popular. There are fewer and fewer people who use cash to make purchases, and it is not uncommon for a user to purchase goods online, without having touched a single coin or ticket in the entire process. This new culture will force the adoption of digital means of payment (such as Google Wallet) and in a few years it is likely that the ‘smartphone’ is the most used payment system.

Currently money is something ethereal or turbid. Tickets have value because we trust that we can exchange them for goods and services, but a piece of printed paper is worth nothing. As long as there is trust in the method by which goods are exchanged, the system will work. Given that digital money is a simpler way to control both money and the people who use it, it is not unreasonable to think that Central Banks encourage more and more the use of cards and non-physical means of payment, in order to that at one time, the coins and bills have disappeared. Then, the money will not be more than a figure on the computer screen, a series of codes in a program that will allow me to buy bread, a new mobile phone or a car.


Disclaimer: InfoCoin is not affiliated with any of the companies mentioned in this article and is not responsible for their products and / or services. This press release is for informational purposes information does not constitute investment advice or an offer to invest.


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