Cryptocurrencies are an intangible means of payment based on blockchain technology, in addition to being a decentralized and alternative system to traditional money, which means that, through these virtual currencies, commercial transactions can be made using digital encryption, which gives security without the participation of intermediaries. As is known, cryptocurrencies burst into the market as of 2009, however, their popularity began since the Bitcoin boom and the appearance of other relevant cryptocurrencies such as Ethereum or Dash.
Difference from traditional currency
While fiat money is controlled by the state/banking system and is found in bank vaults or in the internal systems of the banking system, on the other hand, cryptocurrencies are not controlled by any state or intermediary, they are in portfolios Virtual (Wallets), in which all the transactions carried out by the users who own them are recorded, which in turn, are protected by blockchains.
Traditional banking and cryptocurrencies
Private banks, along with central banks, have gradually been entering the cryptocurrency market and, in this way, will allow the creation of new ways of doing business. This incorporation of cryptocurrencies into the world of traditional banking is considered by many to be the first step of the traditional system when trying to correct its main flaws (such as excessive intermediation, controls, bureaucracy and costs).
Many banking corporations and institutions have started to enter the cryptocurrency market, however, there are some incorporations that use instruments that differ greatly from what a cryptocurrency is as such, an example of this is the use of so-called «Stablecoins» that they are a type of “cryptocurrency” but with the great difference that their price does not vary (as abruptly) as it happens with other cryptocurrencies, however, there are many debates regarding whether this type of “cryptocurrency” respects the true principle of decentralization, transparency and impartiality of the blockchain.
State money (banking system) and people’s money
Robert Kiyosaki in his book “False” (Fake) mentions that there are 3 types of money: money from God (gold and silver), money from the State (FIAT money) and money from people (most recognized cryptocurrencies). Mentions how FIAT money (state or banking system money) is supported by inflation and monetary policies of the IMF (and each country) which are not always executed seeking the best for users (since under an inflationary system and based on debt, savers will always be losers due to the devaluation and loss of value of the currency), while on the other hand there is people’s money (more relevant / recognized cryptocurrencies such as Bitcoin or Ethereum) which is more transparent since it is managed by the same people (using blockchain technology) in a more transparent and decentralized way compared to FIAT money.
Cooperate or compete?
Only the future will tell us if these systems will be able to cooperate or subsist together or finally one system will end up displacing the other. However, we can see how the recognized cryptocurrencies are gradually following the pattern of all the new technologies that were adopted and that later became evident truths: first, they were ridiculed, then they were attacked, later they were adopted and finally, they were taken as a new one. “Obvious truth” or something essential.
What do you think about this topic? Which do you think is better: traditional banking or cryptocurrencies?
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