The nature of money as a means of exchange is all about evolvement, starting from the beginning of human existence when all we knew was trade by barter, which seems to be durable form of exchange until humans found another method with less complexities and a specified unit of exchange compared to trade by barter. Thinking of it, you would realise that our first means of exchange was decentralised or not controlled by an entity, anyone could easily choose who they which to exchange their goods with, without the involvement of any financial institutions, is that not what P2P is all about. A method such as this is not without its own challenges, which brought about a more centralised means of exchange, to create balance in the trading system.
Compared to trade by barter that was self created by humans without a centralised currency, money also known as fiat is issued by the government of a state, which means its controlled by a specific entity. Which kind of seems like we gave up our free manner of trading for a more flexible system but centralised, which seems like a small price to pay for a balance financial system and means of trading. What we never realised was the impact of centralised means of exchange, since an entity is in change of the printing and distribution of fiat, it gives them the right to dictate how it is used and in what manner.
It has even gotten worse in recent times when governmental institutions use financial institutions in charge of the management and distribution of fiat to manipulate the people to their own advantage. I mean you would wake up in the morning and realise new set of fees has been added by banks and this kind of changes would be effective immediately without anyone consulting you before implementing the policy on your account. When you think of it, it is your money which means you should have all the right to dictate how it is used but it isn't so.
You go to a bank and you discover that they are dictating the amount of money you can deduct from your own account but then this so called banks make use of our money behind our backs to invest in stocks and trade, makes profit and instead of them to add to our money in form of interest based on what they have used our money for, you would be surprised that they would still deduct money from your account, some charges with all kind of labels. What they might have used your money for behind the scene is not known to you because the transaction is not made open to the public. In a way it feels like extortion and this is only made possible because of the centralised nature of fiat.
In order to solve this issue money evolved once again and crypto currency was introduced, It must be known that at every point money evolves it occurs to solve a problem in our society, in this case, it was to solve the manner at which the centralised nature of fiat is used to extort people by financial institutions. Crypto currency being a digital form of money, a product of crypto projects built on blockchain technology, with blockchain technology comes a digital public ledger accessible to everyone. It simply means it brought about a more transparent manner of transaction. Though it is not only crypto projects or crypto currency that makes use of blockchain technology and it is not all forms of blockchain that is public, some are private and only accessible to individuals that operate within the entity in which such blockchain is being used.
With crypto currency comes again the era of decentralisation, giving back to the people the control they once had over their manner of trading. Introducing varieties of digital currency that is not controlled by an entity or institution, believe me different governmental organisations have tried to use all manner of regulations to restrict the manner at which individuals have access to crypto currency or crypto trading due to its decentralised nature which they consider a threat to the control they once had over the usage of money.
Can the world run on crypto alone? Before answering this question we must first ask ourselves why was money introduced in the first place? One of the major functionality of money apart from being a legal tender, it is that it creates a specified unit of measure and exchange. You might be wondering what does this mean? Compared to the traditional means of trading which is trade by barter that cause people to lose valuable commodities since the measurements of trade is based on the "need" for it and the "quantity" of the commodity not quality of the commodity. A person can easily get a bag of rice with a tuber of yam, because the other person is in urgent need of yam due to scarcity and have no choice but to exchange a bag of rice for a tuber of yam. With the introduction of Fiat, it solved the issue of exchanging quality goods for lesser goods, since it offers a means of buying the item base on the amount it is being offered, ₦250 = 1 cup of rice, a specified unit of exchange.
Considering the nature of crypto currency it is prone to scarcity, manipulation and volatility compared to Fiat. The centralised nature of fiat might have given more authority to financial institutions over our funds but we forget that due to its centralised nature that is what ensures equal distribution of the currency, decreases volatility to the minimum and eliminates scarcity. I mean in the crypto market can easily be manipulated by the whales, it is a game of who has enough funds to accumulate tokens and being aware that it is liquidity that drives the market. The moment this whales pull their weight all that is left of average people funds is just scraps.
I mean imagine getting to the market to purchase goods with your crypto currency only to get there and realise what was enough to purchase a bag of rice is no longer enough to buy a cup of rice, that level of volatility is not applicable to Fiat. You might be thinking what about "stable coins" they are not really prone to volatility or scarcity, that is because they are pegged to a particular currency e.g USDT/USDC dollar pegged. Which means its mechanism is built on on a specific fiat, which is why one 1 usdt = 1$. This is only possible because of the centralised nature of the fiat it is pegged to, the moment fiat becomes decentralised which would definitely eliminate It's stability, your so called stable coin would also be prone to volatility just like every other crypto currency influenced by liquidity.
With fiat comes with centralisation and stability, with crypto currency comes with decentralisation and volatility. So Imagining a world that operates on crypto currency alone, how do you expect the value of the currency of such a world to be stable? Which would definitely have effects on each countries economy. At the long run the world would be controlled by globalist with enough liquidity to manipulate the market to their own advantage. In this instance decentralisation becomes an illusion since the control eventually falls on the shoulder of few individuals, the only difference is that these individuals could be anyone not just a specific governmental entity. It becomes a game of who has enough of what. A state of anarchy, without any central authority on how money is being used also brings about deregulation. Will this be good thing? You tell me.
This write-up was inspired by weekly featured content titled "Crypto alone" in hive learners community.
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