Just as the notion of email rendered the post office a shadow of its former self, some Bitcoin proponents are claiming that cryptocurrencies might soon overtake fiat transactions as a whole.
Could there be any truth to such a bold statement? As always, Ron and the pros at Crypto Lists aim to tackle this subject in order to keep our readers informed. Let’s begin by taking a look at both sides of the argument.
What do BTC Proponents Have to Say?
We’ll first examine why Bitcoin loyalists have recently been “stirring the pot” in terms of its future (as well as future of the crypto ecosystem as a whole). There are two main perspectives which are often used to justify the prediction that BTC will one day supersede fiat-based transactions:
The first point of view involves the leftist argument that fiat currencies have caused more harm than good over the years. It’s claimed that the centralized nature of these transactions has given governments too much control and enabled them to manipulate the population en masse. The theory is that people are now beginning to “wake up” and to appreciate that cryptocurrencies are able to negate the effects of big brother upon their lives. Some Bitcoin backers have even taken on a near-zealous tone in terms of how it’s only a matter of time before the fiat system comes crashing down like a house of cards.
The second (and perhaps more realistic) perspective cites the undeniably practical nature of Bitcoin as a digital currency. Core traits including rapid transfer times, its decentralized nature and anonymity are all logical advantages that can’t be overlooked. Other issues such as the impact of interest rate hikes, inflation and sheer efficiency represent additional characteristics which have allowed cryptocurrencies to become increasingly popular.
So, it’s clear that there are some valid arguments in favor of Bitcoin overtaking fiat. We should still point out that this is only one side of the coin (pun intended).
A Dose of Reality
While many of the points mentioned in the last section are valid to a certain extent, is it really plausible to assume that fiat currencies will soon go the way of the dodo bird? To address this question, we’ll need to adopt a more pragmatic stance.
Fiat currencies have existed since at least 1,000 CE. However, their real presence was made known in 1971 when United States president Richard Nixon enacted a law that prevented the dollar from being converted into gold. Even if average consumers are unaware of the mechanics behind this form of debt (which essentially applies to all currencies), entire nations have come to rely upon fiat transactions. It’s therefore highly unlikely that buyers will suddenly abandon a system that represents the financial bedrock of their very existence.
Another major problem with cryptocurrencies such as Bitcoin involves their intangible nature. Unlike cash or even credit cards, BTC exists within the ether of the digital community and rather nebulous regions such as the blockchain. Most individuals are unaware of how these systems function; causing them to become wary about their real-world applicability.
Let’s also remember what happens when people begin to feel that their financial security is being threatened. The 1929 Wall Street Crash is a prime example. Once investor confidence began to wane, a run the banks occurred. In a very real way, hiding money beneath the mattress became a viable option. Consider the same scenario in the event that the crypto markets took a massive hit. Should BTC holders suddenly decide to liquidate their accounts, a cascading blockchain collapse might soon follow. This is bad news for consumers and institutions alike.
On a final note, people simply don’t like change. We enjoy the feel of rubbing two coins together in our pocket and flipping through a bundle of cash before paying for an item. Even those who solely rely upon e-wallets and credit cards are well aware that their funds are backed up by fiat currencies. Let’s also not forget that safeguards have been put into place in the event that the traditional markets suffer some type of meltdown (the United States FDIC is a prime example). The same can’t be said in terms of BTC. In other words, there is no at-par guarantee of redeemability.
Where are We Headed?
So, what conclusions can Crypto Lists draw? Although it’s true that Bitcoin and other tokens are gaining popularity at a breakneck pace, the notion that the entire fiat system will be overthrown in the blink of an eye is incredulous at best. However, there’s a very real possibility that they will overtake traditional transactions in terms of popularity from a long-term perspective. In other words, hardcore BTC backers might have to be a bit more patient if they truly want to see the existing fiat environment brought to its knees.