When cryptocurrency first came about in 2009, nobody knew just how big it would become. But here we are. As of June 2021, the number of global crypto users crossed 200 million. While more and more people jump on the crypto wagon, the question that now seems to be on everybody’s mind is whether cryptocurrency is the future of money. Put simply, will you be able to use your bitcoins to buy your morning coffee?
Comparing Cryptocurrency and Money
Apparent from the term cryptocurrency itself, it is clear that the designers of the technology meant for it to be used as a medium of exchange. But when money was first invented, it was made to solve some very specific problems. Let’s take a look at these characteristics and see if cryptocurrency fits the bill too.
Medium of exchange
Money was created to fill a gap in the barter system. Imagine trading a bag of onions for a litre of milk, how would you decide how much of one is worth the other? So money was invented as a common denominator, which could be used to facilitate trades of goods and services. While cryptocurrency is not legal tender (meaning people are not yet compelled to accept it as a form of payment), it has and is being used to conduct transactions in the same manner. A prime example is Elon Musk’s Tesla. The company not only invested in Bitcoin but also started accepting Bitcoins as payment for their vehicles.
Unit of value
As a unit of value, money is used to determine the fixed price of goods and services. At the moment, cryptocurrency’s high volatility means that it is not a favoured measure of value. For example, if you spend one bitcoin to buy a dress and the next day the price increases, you will have lost a lot more money than you meant to. But this is partly because a majority of cryptocurrencies are held by a small number of people. Even minor changes by one or two persons can lead to larger consequences. Experts agree that with more participants in the market, it is possible for cryptocurrency to stabilize.
Imagine the crypto market as a small rickety boat in a stormy sea. The boat is moved by the force of waves as well as the movement of the few people on it. Now imagine a large ship with hundreds of passengers. Despite the movement of people and strong waves, the ship would not be easily shifted.
Store of value
Store of value refers to the fact that one can hold on to money to store it and use it at a future time. It means a hundred rupee note will give you a hundred rupees worth of goods even months after you first received the note. Technically, cryptocurrency does store value. The issue is that this value is subject to frequent and extreme changes. However, experts say that cryptocurrency market caps are bound to increase and stabilize over time, making them a rewarding investment. In fact, in April 2021, JP Morgan reportedly said that the decreasing volatility of Bitcoin was making it more appealing for institutions. This is exactly why buy-and-hold strategies are so popular.
The Present Scenario
Despite the prevalent issues, crypto is already being used as a currency. The widely used payment platform PayPal recently added cryptocurrency related features to their app. Its users can now make transactions using currencies like Bitcoin and Ethereum. You can even use bitcoins to pay for apps on the Microsoft store. In September 2021, El Salvador became the first country to recognise Bitcoin as a legal tender. Malta, one of the world’s smallest countries, opted for a friendly approach to cryptocurrency which has led to increased integration of the concept in general society. In India, a home decor brand known as The Rug Republic recently added cryptocurrency as a payment option. Bitrefill, another platform, allows customers to use crypto to buy gift cards from well known brands like Cafe Coffee Day and Nykaa! So, clearly, cryptocurrency isn’t as cut off from the mainstream as it seems.
The Final Verdict
The fact is that money is a constantly evolving subject. It always has been. In fact, paper money became popular only around the 17th century. Most people had been using metal coins until then and they must have been as perplexed as you are now. So, there will come a day when you can use your bitcoin and ether to buy yourself a coffee. With technological developments occurring at the speed of light, it may well be sometime soon.