When Will Crypto Replace Fiat?
A growing number of businesses and individuals are turning to crypto, especially during these turbulent times.
In the last five years, cryptocurrency startups have raised over $20 billion via initial coin offerings and proven to be of great use in the business sector. Financial analysts predict that fiat money will be digitized and we will inevitably see digital versions of existing currencies.
Although there are many benefits, the general public still seems to have a negative perception of cryptocurrencies and consider them to be untrustworthy.
Since they may replace fiat currency, let’s take a closer look at the benefits of crypto assets:
- In comparison to fiat currencies, digital assets ensure transaction security and are highly transparent — the money trail can be traced all the way back to when it was created.
- Cryptocurrencies eliminate the need for intermediaries (banks and brokers). They also can’t be controlled by the government because they work on a decentralized network.
- The value of fiat money depends on fluctuations in inflation — the more money is printed and circulated, the more fiat money loses value.
In contrast to that, cryptocurrencies’ supply is limited, so their value will only go up when demand increases. In addition, over time you will get paid more than the initial purchase price.
When talking about cryptocurrencies, we can’t help but mention tokens — assets that come in a digital format. They are a subset of cryptocurrencies and can be of two kinds:
- Crypto tokens used as a means of exchange or currency (seen in gaming as a reward for completing tasks).
- Non-fungible token (NFT) — a token tied to a digital asset. NFTs can be compared to a one-of-a-kind trading card, making you the sole owner and the card itself being absolutely unique.
A token’s value is defined by a number of factors, including purpose and functionality. Tokens can be used for increasing a user’s payments or tracking goods more accurately, efficiently, and cheaper.
With NFTs, creative people can sell their work directly to their audience without intermediaries that significantly decreases an artist’s revenue.
One of the most important factors is the amount of adoption — the number of people or businesses accepting this token as a means of payment. The wider the token adoption, the more stable and credible it becomes.
Token branding is another factor that may significantly affect its value Though brand awareness undoubtedly helps to increase a token’s demand, if advertising is done wrong, it may provoke adverse reactions to blockchain technology as a whole.
Tokens are still a new concept, so any activity or news related to it may dramatically change its value. This can only be stabilized over time through more incoming funds.
The last factor is the number of available tokens, which (as we’ve already mentioned above) is set.
As time passes, rising demand increases the value of both NFTs and tokens, while fiat money, on the contrary, loses its value.
Nowadays, the usage of tokens is gaining popularity and has even become a trend; NFTs are dramatically changing the music industry and fast food giant Burger King launched a loyalty program based on NFTs.
Digital assets offer the business world new perspectives and possibilities. Companies and individuals have to accept, adopt, and implement it if they want to keep up with the times.
As far as the future of cryptocurrencies, it’s hard to predict an exact time when digital asset transactions will be considered the new standard and treated equally to fiat currencies.
Nevertheless, judging by the fact that the time between the launch and massive acceptance of new technologies is getting shorter and shorter, it could be less than ten years before we completely replace fiat with cryptocurrency and safely keep our money in blockchain ledger.
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