Money has become a medium of exchange that is needed by all levels of society around the world, a medium of exchange that is an important part of life that cannot be separated from its small or large nominal. When I first heard the word "Redenomination" first thing that came to mind was the currency that 1000 changed to 10, as discussed by the Government of Indonesia several years ago about the discourse of redenomination of the IDR currency.
As time goes by and the development of technology in the financial sector that makes exchange tools other than fiat currencies like Bitcoin, Ethereum and others become one of the options that can be used in modern times like today to make transactions digitally, because digital currency is almost the same as fiat currency. Redenomination was eventually used by several cryptocurrencies as a form of simplifying the value of these crypto assets.
Redenomination can be explained as a form of change made to make the nominal value of a currency simple, in short, simplifying the currency without changing the value. The analogy is like the previous price of one currency was 1000 with a selling value of 1000, and after being redenominated the currency became 1 with a fixed selling value of 1000.
In the case of fiat currency, redenomination becomes necessary when a currency has a large number of digits to deal with inflation, and Redenomination also aims to simplify accountants' calculations because many unnecessary zero digits will only add to the accountant's work when conducting financial audits. The existence of Redenomination will make it easier for the community to make transactions, for example, we do not need to pay 1000000 just for a piece of bread if by redenomination a slice of bread is enough to pay 1 or 10.
Redenomination in cryptocurrency is slightly different from fiat currency because the two currencies have different case studies in their application. In cryptocurrencies, redenomination is done to reduce/change the digit 0 to 1000:1 or 100:1, and update the token in the hope that after the redenomination it will make investors of all classes from small to large investors invest in the token.
Redenomination is operated by the token developer by involving investors in the project as supporters of the token and also in cryptocurrency, token holders are also allowed to provide support for the token that will be redenomination. Some sources say the digit pruning process on crypto assets is similar to the very different Burn token. Burn is if the issued token exceeds the limit, the token party will burn the token to keep the price and amount as expected.
After the Redenomination of a token is done, the token holders only need to Swap the old token for the new one. Redenomination of cryptocurrencies can be done without involving the government or certain authorities to implement it.
In fiat currency, redenomination can only be implemented after the government and the President of the country decide whether to redenomination or not. Careful considerations must be taken into account, the redenomination cannot be applied unilaterally because the relevant government must ensure the political and economic stability of the country to be able to redenomination the fiat currency belonging to the country.
