Lately, people are becoming more concerned about the existence of cryptocurrency. They dispute and raised disagreements to know if cryptocurrency is real money or not. Most individuals, mostly those in the rular environment only believed that the fiat currency issued by the national government is the only legal currency that is accepted for the exchange of services.
As we proceed further in this article, to clear this disagreement among individuals, we will be studying the properties of cryptocurrency and the principles behind the creation of money.
What Is Money?
Money operates as a tool that is used as a medium of exchange and a store of value. It serves as a common measure for products and services, it makes transactions faster and easier, and is a tool that enables individuals to make investments. Money has undergone a series of changes such as; precious metals, paper money, and down to the modern banking system.
Features of Cryptocurrency
Limited Supply: in the whole world, we have just 21 million Bitcoin available. That’s the limited supply of Bitcoin, and this adds to its scarcity which will make it have value. Not just Bitcoin alone, in the cryptocurrency space entirely there is a maximum number of cryptocurrencies that can be produced.
Decentralization: there are certain cryptocurrencies that work on a decentralized network called blockchain. Since these networks are circulated across several computers around the world, no intermediaries are needed to execute transactions.
Security: Cryptocurrencies use complex cryptographic algorithms to maintain good security and safe transactions. Verified ownership and illegal alteration can be avoided by private keys and digital manipulation.
Elimination Of An Intermediary: with cryptocurrency, an individual can transfer money to any part of the world or place without the need for a central body to execute the transaction. Individuals can transfer and receive money smoothly with the help of cryptocurrency.
Is Cryptocurrency Real Money?
Cryptocurrency has some features related to fiat currency. Considering it as “real money” depends on one’s opinion. These opinions will be discussed in the subsequent paragraph;
Unit Of Account: cryptocurrencies can act as a unit of account within their own particular space. Cryptocurrencies prices are usually unstable which makes them to be regarded as less reliable assets for stable pricing.
Legal Tender: In most countries of the world, cryptocurrencies are not acknowledged as legal money. Fiat currencies are usually issued by the government of a nation and it is legal for paying off debts. In most countries, the use of cryptocurrencies for financial activities is highly prohibited by the government.
Store Of Value: as a result of the scarcity of cryptocurrency, most individuals see cryptocurrency as a store of value. The fluctuating nature of cryptocurrency makes people see it as an unstable asset. Well, money needs to have a store of value.
Medium Of Transaction: in the recent time as the number of companies increases, mostly tech companies and businesses, cryptocurrencies are accepted as a medium of exchanges or transactions. However, when compared to fiat currency, the acceptance of cryptocurrencies is restricted in many places.
Depending on one point of view, debating on whether cryptocurrency is “real money or not” can be decided by an individual. However, despite having some distinguishing properties as money such as; a unit of account, store of value, and can be used as a medium of transaction, considering cryptocurrencies as a legal tender and to be used as a medium of transaction is still restricted.
Cryptocurrency is an advanced fiat currency in a digital form, giving a conceivable advantage but also it faces some disadvantages regarding regulatory policies and in the financial market as a whole.