You do not have to be a financial expert to see that cryptocurrencies like Bitcoin and other currencies are on the rise and starting to gain traction in the financial world. Cryptocurrencies are continuing to gain traction with many benefits that make them a popular option, but will they ever replace centralized currency?
Centralized Systems Still Dominate
While cryptocurrency certainly is on the rise, it is still dwarfed by the size and omnipotence of the centralized financial institutes and systems that have been in place for so long. Central authorities issue the currency that is used to power the economy, while centralized institutions like banks control assets providing the ability to regulate the flow and supply of these currencies with a central authority.
Issues with the Norm
Centralized currencies have been the norm for such a long time that it is hard to imagine anything else. There are benefits to this and many people enjoy trading or earn a living in the financial markets, but there are also issues with centralized currency. The centralization of authority and practice has created high levels of risk and financial institutions are accused of having a lack of transparency. As an example, if a central bank were to print more money to handle a financial crisis (like the pandemic) but does not resolve the crisis, it could disrupt the entire economy through extreme inflation.
Decentralized the Answer?
Decentralized currency could be a solution to this problem which is part of the reason that Bitcoin and other currencies have gained popularity in recent years. Digital currencies that are issued and maintained using blockchain and digital ledgers remove the need for expensive payment intermediaries which can provide superior price stability. Furthermore, blockchain offers a transparency that traditional financial systems lack, reducing the risk for those involved and increasing accessibility. This could democratize access to financial systems allowing those in poor and remote regions to invest, buy, sell etc.
The Digital Gold Rush
While cryptocurrencies have been seen as an alternative model in recent times and even known to be used on the dark web, many Governments and central banks are now embracing the digital gold rush with many planning on introducing their own digital coins and tokens. This is easy to see why as the technology has developed and current payment models can be inefficient because physical cash is expensive to store and distribute. Decentralized currency as the norm could improve efficiency with full accessibility and solve mistrust of a capitalist system through full transparency – these are two fundamental issues with the current system that could be solved.
Of course, it is not so straightforward to make a sudden switch to decentralized currencies and there are obstacles to overcome first. Scalability is one issue and it is likely that there will need to be some sort of authority governing the process for mass adoption. User-friendly interfaces will be another issue as everyone will need to be able to get to grips with this new way of managing money and there will always be backlash to significant lifestyle changes like this.
While there are certainly obstacles and issues to come, it seems that cards and cash could be replaced with cryptocurrencies before long which could solve many of the key issues facing the centralized financial systems in place.
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