At Expensivity, Bernard Fickser, who has explained how to sell non-fungible tokens (NFTs) now offers “The Truth About Cryptocurrencies: A Clearheaded Guide to the Crypto World.” (January 15, 2022) For your convenience, we are serializing his work, which can be read in whole here. Here’s Part 4: 4 Crypto’s Revolution in Money and Finance
Cryptocurrencies seem different from mass delusions of the past. They do novel things in the world of finance that many people want, such as allow for anonymous exchanges of digital currency that feel a lot like exchanges of ordinary cash. They promise to bypass intrusive government control. And they’ve attracted a lot of very smart talent that is deploying some very cool mathematics and computer science.
At the same time, cryptocurrencies raise a lot of concerns, some of which I touched on in section 1.2 (“Dangers, Pitfalls, and Snares”), but others that seem more fundamental and may upend cryptocurrencies in the long run (see the later sections of this article).
The biggest concern for me personally with blockchain-based cryptocurrencies as they exist now is that they may in fact represent an immature technology, and thus in the end may give way to a better form of cryptocurrency. Just as the automobile did away with the horse and buggy, such a superior cryptocurrency of the future could do away with cryptocurrencies of the present by greatly devaluing them or even sending them to zero.
Even so, I want therefore in this section to consider some of the features of existing cryptocurrencies that commend them and that even in their present form are making them a revolution in money and finance. At the same time, I want to point out some of the fault lines that may make this revolution less than totally successful. 4.1 Used Like Money
Cryptocurrencies provide a way of securely moving digital items across digital space, These digital items look like currency and that in some places are actually used as currency. In Venezuela, for example, Bitcoin circumvents the country’s discredited central bank and the hyperinflation it has caused. More strikingly, in early June of 2021, the El Salvador government approved Bitcoin as legal tender .
Since then, Bitcoin has become ever more entrenched in the El Salvadoran economy. In October 2021, Bloomberg reported : Adoption of the cryptocurrency is a way for Salvadorans to access more payment methods in a nation where more than three-quarters of citizens are unbanked, [according to central bank President Douglas Rodriguez}. He called it a means of inclusion for those whom the financial industry deems too low-income or high-risk.
Salvadorans began using the government’s Chivo wallet last month, which came preloaded with $30 in Bitcoin, to buy dips and sell rallies with fractional amounts of the cryptocurrency [thereby allowing Salvadorans even to speculate, on a small scale, with Bitcoin].
Businesses in the capital of San Salvador, from Starbucks and McDonald’s to local electronics stores, have begun to accept it in exchange for goods. Rodriguez reiterated that use of the cryptocurrency was optional and expected it to be used alongside the U.S. dollar.
The next step for the government is providing Salvadorans living in the U.S. with identification numbers, a requisite for opening a Chivo account, he said. Doing so could offer a cheaper way for those living abroad to send money back to El Salvador, Rodriguez added.
The central bank expects remittances to rise to a record $6.3 billion this year, 31% more than in 2020… Meanwhile, in August 2021 , the city of Miami began experimenting with its new MiamiCoin token, based on the CityCoins mining process built on the Stacks protocol. According to the Washington Post , reporting at the end of September 2021, “Since CityCoins unveiled ‘MiamiCoin’ in August, the protocol has sent about $7.1 million to Miami.” That’s over $7 million in crypto-taxes in less than two months. And in December 2021 , Jackson, Tennessee became the first US city to make Bitcoin a payroll option for employees.
The volatility of Bitcoin and other cryptocurrencies means that, at least for now, they are less than ideal as a long-term store of value capable of reflecting consistent stable prices (i.e., prices that don’t swing wildly). But for instant payments where prices can be adjusted on the fly, cryptocurrencies can work like money. Even with their price volatility, cryptocurrencies offer protection against hyperinflation.
Moreover, if the example of Miami in using crypto to pay for city expenses (and thus essentially to act like a tax) is any indicator of things to […]
source How and Why Cryptocurrencies Are Revolutionizing Money
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