🤔Will Crypto Replace Fiat Currencies in The Future?

“In five years, if you try to use fiat currency they will laugh at you. . . Bitcoin and other cryptocurrencies will be so relevant … there will be no reason to have the fiat currencies.”— Tim Draper, Venture capital investor and Founder of Draper Associates

As a venture capitalist that has spearheaded investments in Tesla, Twitter, and Skype, Draper knows money. He initially broke into the cryptocurrency game when he brilliantly purchased 30,000 BTC (Bitcoin) in 2014 from a government auction touting seized assets from Silk Road. Back then, the valuation of his purchase was $20 million. Today, those same coins are worth nearly $214 million.

Draper is one of many high-profile figures that believe the fiat system will soon succumb to various digital coins like Bitcoin, Ethereum, BTS Tokens, and the many others in existence. Futurists like Thomas Frey share similar sentiments as he has been cited as stating that cryptocurrencies will supplant about 25% of national currencies by 2030.

Part of why these people believe such a seismic transition will take place is current monies are bound by geographic borders. He evokes the Nigerian Naira as an example, pointing out that it drops nearly 30% in value when taken beyond its native boundaries.

While there are many factors as to why this issue is so hotly debated in today’s climate, one of the driving factors is the 2008 financial crisis which has caused a dramatic shift in the country’s faith in current institutions. This catastrophe led directly to the creation of decentralized currencies.

When we compare fiat and crypto, Bitcoin is worth thousands more than the standard dollar, indicating great demand. This also means that in some sense, crypto monies like Bitcoin have already overtaken the dollar. On paper, this is hard to dispute in terms of value.

As an increasing number of people become privy to cryptocurrencies, that demand is only going to increase, along with how seriously people perceive the currency.

As with any shift of this magnitude, however, there some significant pros and cons to analyze. So let’s go deeper.

The Pros of Digitally Dominated Finance

A recently released report from Futurism explores some potential outcomes of a future where fiat falls to the powers of cryptocurrencies. One of the most notable upsides of the equation is this: Because of crypto’s decentralized and unregulated nature, this currency is not as easily manipulated as current cash options. This means that cryptocurrencies are not subject to interest rates, exchange rates, or transaction charges, effectively implementing a global currency.

While this is sure to impact intermediaries, businesses and consumers could greatly benefit from this shift.

Moreover, with the widely talked about issues surrounding universal basic income, cryptocurrencies are in a position to better support such initiatives than fiat as the income is universal in nature. In fact, several institutions are already experimenting with blockchain-based universal basic income initiatives.

Additionally, since crypto is not tied to any government or financial institution’s actions (or lack thereof) the currency cannot be reduced in value because of the conduct of these groups.

While all of this is certainly something that breeds hope and excitement, it doesn’t mean that there aren’t downsides to the crypto invasion that we must consider if we want stability.

Concerns in Cryptocurrency Changes

If the scenario of crypto superseding fiat comes to pass, there are some serious challenges that will need to be contended with. If crypto comes to outpace the usage of cash, current monies will dramatically drop in value, with little to no recourse available. Businesses and individuals could suffer terrible consequences as a result, assuming they failed to hedge their bets.

In the event that cryptocurrencies all-out replace fiat, new infrastructures and systems would need to be developed quickly to help the globe transition as smoothly as possible. Of course, inevitable difficulties and unforeseen consequences will arise with the downfall of cash; it’s rapid incompatibility and lack of value would result in many folks at a loss for assets.

Moreover, financial institutions would need to scramble to keep up with the changes; many of which will crumble as a result, opening a whole different can of worms.

The impact on individuals and families aside, a crypto-controlled future would result in major governmental problems. The government’s control over currency production is vital in maintaining the status quo as this is how they (theoretically) determine how much of a currency to print in response to current foreign and domestic demands.

If crypto were to take over, the creation of new coins would be solely dependent on independent currency miners.

So, that still leaves the ultimate question: Will crypto take control over cash?

The Future of Finance

Regardless of how anyone feels about to prospective switch from cash to crypto, the situation is far more mysterious than most will admit.

Cryptocurrencies are currently in their infancy; much like the internet was in the 1990s. At first, only a small group of people were online, then it began to spread like wildfire, and now nearly everyone has joined in.. The same thing is likely to happen with cryptocurrencies.

With abundant speculation that crypto is in a bubble poised to pop at any time, the looming threat of crypto taking over could be superfluous conjecture. But as with all things technology, things can change in a nanosecond and predicting the future is incredibly challenging.

That said, while crypto certainly has a place in the new world, it is unlikely to completely take control. The response of various countries to crypto has been erratic, so the effect will be different in divergent parts of the world. At least for now.