Could crypto be the answer to a universal currency?

Could crypto be the answer to a universal currency?
Could crypto be the answer to a universal currency?

Could crypto be the answer to a universal currency?

Cryptocurrency has become one of the hottest trends in recent years. The amount of money that has flowed in and out of this industry since 2017 is astounding. Despite pulling back quite sharply in the first quarter of 2022, the cryptocurrency market had a market cap of more than $3tn in the last quarter of 2021. If this were a stand-alone company, it would be the largest company on the planet. That would be worth more than Amazon and Tesla combined in July 2022 valuations.

Market cap is an abbreviation for market value. Market value is the value of a company traded on the stock market, calculated by multiplying the total number of shares by the current share price. This is the most effective measure of how well a company is performing.

Bitcoin history and adoption

Bitcoin rose to prominence after the 2008 financial crash and was created by Satoshi Nakamoto. The exact identity of Satoshi is unknown. Many people have speculated about a number of different people, some even think it might be a group of people, and others have speculated that it might have been someone who came back in a time machine. Barring the obvious, cryptocurrency has a variety of uses. It is fast becoming one of the most lucrative investments the world has seen. If you invested in Bitcoin in 2017, your current investment would have increased 500% in value by Q2 2022. Bitcoin is the face of the cryptocurrency revolution as it has become legal tender in countries like El Salvador.

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The goal was to create a completely decentralized currency. This means that no third party, usually a bank, is involved in the middle. People could send Bitcoin directly to each other’s wallets without anyone else having to monitor the transaction. Bitcoin transactions are verified by network nodes through cryptography and recorded in a publicly distributed ledger called a blockchain, which anyone can access.

The first design is arguably the most revolutionary economic invention of the 21st centurySt century. The influence of crypto has spread into our society. You’d be hard-pressed to find people who haven’t at least heard the term, although you’ll likely come across people who don’t quite get it.

Cryptocurrency and regulation

Bitcoin is the largest cryptocurrency, but there are many others, such as Ethereum, XRP, Solano and meme coins such as Dogecoin. A meme coin, like Dogecoin, has no practical use or utility, but captures the imagination of investors online and through memes. Cryptocurrency offers some answers to the problems inherent in centralized finance. It is certainly not perfect, and may require serious regulation to become a universal currency. This would pose a problem, as one of the main selling points of cryptocurrency is the free market approach and anonymity that transactions provide.

Regulation could wipe out these selling points and allow centralized finance to gain more influence over cryptocurrencies. This will cause friction among cryptocurrency enthusiasts, who will argue that the whole point of it is to remain decentralized.

NFTs

The market size cannot be underestimated. It has spawned entire industries within it, such as the non-fungible token (NFT) industry. Again, an industry with astonishing returns if you invested before the boom that had taken place in the last 18 months.

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A non-fungible token is a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. Ownership of an NFT is recorded on the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. They’ve gone from relative obscurity to being a multi-billion dollar industry with huge social media sites like Instagram getting involved in the craze.

While the industry is still in its infancy, there are many positives it brings to the table. It could solve some key problems if each country had its own rules of the game. However, it can cause many other problems. A universal currency may be too complex for such a diverse world economy. Depending on how successful countries like El Salvador and the Central African Republic are in implementing it as a currency, their experience could serve as a dry run for other countries to follow.

In conclusion, it is important to note that centralized finance remains king for now. Realistically, it is difficult to imagine a world in which the US dollar and euro would be completely replaced by a new form of finance. But who knows where we might be 50 years from now?

Image credit: Thought Catalog on Unsplash

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