If you’ve considered Bitcoin – read this
If you’ve been taking an interest in cryptocurrency, you’re probably already well aware that Bitcoin is very far from being your only option. What might surprise you, however, is just how many cryptocurrency options there are at this point in time, about 1500 in fact and, what’s more, new cryptocurrency options are being launched all the time.
Cryptocurrencies versus fiat currencies (currency that a government has declared to be legal tender)
What’s really astonishing about the number of cryptocurrencies available right now is that there are only about 200 countries in the world. In other words, there are over 7 times more cryptocurrencies than there are national currencies, backed by some sort of regulatory authority such as a government and/or central bank. What’s more cryptocurrencies can cross boundaries far more easily than any national currency, even the U.S. dollar. Although the U.S. dollar is widely accepted overseas, even without being actually physically exchanged into local currency, there will be some sort of accepted exchange rate (or, more accurately, a range of exchange rates depending on where you go). Cryptocurrencies can, however, be accepted natively for cross-border mono-currency transactions even between buyers and sellers on opposite sides of the world – all it takes is trust.
Trust – the foundation of all fiat currencies
In the very early history of humankind, people used to swap physical goods and services on an ad hoc basis. This, of course, was a limitation on commerce and it didn’t take too long, in historic terms, for the concept of money to be invented. The idea quickly took hold and since then it has undergone a continual process of refinement from shells to coins made of different metals, to paper currency, to “near cash” items of various sorts from poker chips to gift cards most, if not all of which, are now available in digital form. Fiat currency is a great idea from the perspective of facilitating commerce. It’s massively easier to make a digital transfer of money than to transport chests of gold coins from A to B, but ultimately, it is only as good as the trust on which it is based and the simple fact of the matter is that these days there are a lot of people who feel like they have been betrayed by those in charge of fiat currencies and, hence, that it is time for something new. The problem here is that the “something new” may turn out to be, at best, no better than the something old.
Crypto currencies and the emperor’s new clothes
National currencies are backed by the nation which issues them. It is, therefore, hardly surprising that the most economically-powerful nations tend to have the most globally-desirable currencies, the U.S. Dollar being the prime example of this. Crypto currencies, however, typically only have the backing of the brand behind them. The whole point of many crypto currencies, including Bitcoin, is that they are decentralised and, hence, controlled by no one individual or organisation. This may seem appealing to people who have lost trust in those whose job it is to regulate national currencies, but the fact still remains that, at the very least, those people are identifiable and can be held to account for their actions even if the sanctions levied against them are less than some people would have liked. Since nobody actually owns crypto currencies, it’s difficult to impossible to hold anyone responsible for how they are managed and that effectively means that it is difficult to impossible to stop people starting new crypto currency schemes and using aggressive and persuasive marketing tactics to persuade people to back them. Even though many mainstream organisations are clamping down on allowing crypto currencies to promote themselves through their channels, there are still plenty of outlets through which they can do so. Therefore, anyone thinking of putting their money into any crypto currency scheme, be it Bitcoin or anything else, would do well to remember the old saying – buyer beware and, as a minimum, do thorough research before parting with their cash.