Money was one of our greatest inventions ever and it has been traded in various forms. Money enabled us to move away from barter and take part in trade thus developing our economies. Many types of precious objects, acting as a medium of exchange, have been used for this purpose. In the early ages, communities traded grain, cattle, shells, and gems for other goods and services. People were always comfortable with physical types of money which they could touch hold and store.
As humanity evolved, rulers emerged and grew from tribal rulers to emperors and then states. This created political money or money that is backed by a central authority. Today we call this Fiat currency, and this includes currency issued by many countries. Fiat Currencies are supported as legal tender by a state and are accepted customarily by the members of the state and sometimes others for trade. A Good example of a globally recognised Fiat Currency is USD. At one time they were backed by gold, but today they are supported by less gold. Fiat currencies have other problems
Governments keep issuing them whenever there is an economic crisis. This leads to inflation
Governments borrow using them creating significant national debt. This makes Fiat currencies are debt-laden
The advent of internet has brought billions of people across the world together eliminating physical and political barriers. Today an idea expressed by one person can be viewed, commented and shared by billions around the world. This is the amazing promise of internet.
Cryptocurrencies have emerged in this environment. They are decentralised currencies which are not managed by a state actor, they are limited in supply (Bitcoin has a maximum of 21million) and they are encrypted to avoid fraud. They do have the potential to become genuine global currencies if more people start accepting and adopting them.
They eliminate the middlemen from central banks , retail banks to card providers who perform trust roles in the economy. These middle men charge for their role and also restrict billions from participating in the global economy. There are about 2bn people in emerging markets who are not able to take part in the banking system because they do not qualify. Cryptocurrencies will enable these people to take part in the economic system directly and this would be a great boost to the global economy.
Cryptocurrencies do have their problems such as scalability and speed of transaction which needs to be solved through technological evolution. If these are achieved there is the promise of something genuinely decentralised and owned by the people emerging.
Let's get to the core of the question. I am not convinced that cryptocurrencies are a scam as a concept. Some individual currencies in practice could be. There are too many of them at the moment and not all of them have robust technology behind them. Coming back to holders of cryptocurrencies there are two types of holders. They are:
Speculators
Believers or adopters
Speculators have been driven in by the wild ride in prices. They may get burned by big drops .A s this is an emerging technology and the volatility is going to be wild. Some currencies are also a scam and speculators who don't understand the technologies and principles will see their portfolio wiped out
Believers and adopters- Those who invest wisely understanding the nature of the currency and adopting it because they see what it does and believe in its potential are less likely to lose out.
My advice is don’t bet your house on cryptocurrencies but watch the space and keep learning.