It has long been known that states have been working on digital currencies. It is not hard to say that this idea is inspired by cryptocurrencies.
Today, several countries from China to the Netherlands, South Korea to the US are working on digital currencies at full speed. The motivation here comes from the progress cryptocurrencies have made since 2008.
Why have cryptocurrencies attracted that much attention?
At this point, it is possible to talk about 3 main factors.
- Cryptocurrency had a decentralized structure. It had no need for an intermediary and technically it was impossible for a central authority to get involved in it.
- It was much more advantageous than fiat para in terms of cost and speed. Also, it had a structure that minimized the time and cost of loss in money transfers.
- It provided more privacy for personal data and assets than traditional finance.
What happened in traditional finance?
The 2008 economic crisis had a big effect on the emergence of Bitcoin. This crisis caused a big change in people’s attitudes and habits.
- People’s trust in central authorities was greatly shaken with regard to the protection of their assets’ value.
- They saw that intermediary institutions may not fulfill their promises in protecting the value of their savings.
- It was understood once again that “saving” and “protecting the value” are not the same in fiat money.
- Moreover, cash lost its functionality as the time passed. Cash proved to be insufficient for fast shopping and payment.
- It was also understood that it is not a must to make a payment to intermediary institutions in a financial transaction. It was no longer obligatory to pay the transfer fee that intermediary institutions charge in every single transfer because technology had found a way to remove this cost through other methods.
All these developments demonstrated that the traditional finance world needs a change.
Cryptocurrency: Accepted or rejected, but not ignored
At first, countries reacted differently to cryptocurrencies. Some countries immediately embraced this technological infrastructure and people’s tendency towards it starting regulation some countries like Russia and China chose to introduce strict prohibitions.
The rumor went that there was no value underlying a cryptocurrency.
This was a delusion, though. In fact, people stopped issuing money from “precious metals” years ago and there was no value under a banknote, either. What made it valuable was its prestige and circulation.
At this point, states either recognized or rejected cryptocurrency, but nobody ignored it. It was possible to observe the influence of cryptocurrencies in any step taken in financial systems whether they were regulated or prohibited.
The most interesting thing was the states’ will to issue digital money.
Can digital money be cryptocurrency?
The emergence of digital currencies is as important as any threshold passed throughout the evolution of money from shells to coins, banknotes and credit cards respectively.
Digital currencies comprise a system that can remove all the burden and costs of issuing banknotes. Besides, it is cumbersome to carry and transfer banknotes.
The biggest advantage of digital money at this stage is that once it is put into use, it is much more functional than cryptocurrencies in terms of spendability.
China has already announced that it can use digital yuan in Starbucks, McDonald’s and Subway. Cryptocurrencies need innovative solutions in this issue, and people are working on it.
So, can digital money be cryptocurrency?
As we mentioned earlier, the biggest gain of cryptocurrencies is that they are decentralized and can move freely letting financial transactions to be performed within the privacy.
Digital money will fail to meet these two needs.
Another difference is that cryptocurrencies were designed for functionality. Cryptocurrencies generally emerge to meet a certain need. Some offer transfer speed. Some can democratize advertiser-consumer relations. Some help to have a say in a social community. Some are highly advantageous in terms of privacy. We can list more advantages just as we can list more cryptocurrencies…
“Cryptocurrency versus digital money”
All these inputs lead us to one single conclusion: Any new step in the “Cryptocurrency versus digital money” dualism appears with different functions and advantages. Thus, it is certain that this is a constructive competition. Digital money will not turn into cryptocurrency. But now, the old financial system will get rid of its burdens and become more functional.
Cryptocurrencies offer a new order, and digital money offers a new method.
After all, what we see is more a picture of “digital money and cryptocurrency” than a picture of “digital money versus cryptocurrency”. It is a competition where there is no one single winner but there are many structures that affect and develop each other.
Social and technological developments are always ahead of the economic order. Now, we are observing that the parameters and tools of the economic order are trying to catch up with social and technological developments; we are in a way witnessing history.
Bu içerik en son 26 October 2022 tarihinde güncellenmiştir.