Is Cryptocurrency Real Money?
When you open your wallet or log into your online bank account, there’s no doubt that those dollars and cents are real money. You can spend it, save it, invest it – as long as it’s accepted in your region, you can do whatever you want with that currency.
But when we start looking more closely at cryptocurrency, a few key questions pop up. Maybe the most fundamental question is whether crypto counts as real money. If it’s not real money, what exactly is it? On one hand, it's a type of digital currency. But it's also so much more.
Let’s get into whether cryptocurrency is real money or not and where we expect the industry to go in terms of adoption, acceptance, and viability moving forward.
Crypto vs. Currency – Similarities and Differences
To determine whether crypto is real money, we need to define money at a foundational level. That means comparing it to the currency we use today and addressing some relevant pros and cons.
Defining “Real Money”
What is real money, anyway?
Most definitions use terms like “medium of exchange” or “liquid asset used in transactions”.
These all make sense in the context of our current economy, and you can apply the concepts throughout history as societies used different types of currency in the public square.
Livestock was once used as a rudimentary currency or bartering unit, followed by everything from shells and blocks of salt to precious metals like silver and gold.
Modern coinage came about around 500 BC, and it wasn’t until 800 AD that humans first started using paper money.
Another interesting point often made by crypto advocates is that modern money isn’t backed by any legitimate source of value like gold, as it was more than 100 years ago. Our money is known as fiat, meaning it is only made legal tender by government decree and nothing else.
With all that in mind, we get a clearer picture of the somewhat complex circumstances of currency over time and just how quickly things can change.
How does crypto fit into the picture of modern money? That’s exactly what economists, tech innovators, financiers, and governing organizations are trying to figure out at the moment.
There’s no doubt that crypto is considered real money by the biggest enthusiasts in the space, but what are the pros and cons of crypto being used as currency like a dollar bill or four quarters?
Let’s get into some of these questions now.
Advantages of Crypto as Money
You don’t need to understand crypto too deeply to recognize the unique value it brings to the table compared to traditional currency and legacy financial systems.
The main appeal of crypto as money is its immutability, meaning it cannot be manipulated, altered, or inflated using continued “money printing.” Just tune in to any news report about recent inflation trends to see why this is treated as such an important point.
Secondary benefits of crypto include anonymity, security, and decentralized digital infrastructure, rather than being regulated and controlled by a central authority like a bank or government institution. A digital wallet is undeniably more secure than a real one full of cash.
Some cryptos are also astonishingly fast and efficient in terms of transaction time and the simplicity of the exchange process. Compare this to the minutes, hours, or even days it takes to transfer traditional currency, and you start to understand the practical appeal of crypto.
Lastly, we’re seeing countless blockchain technology innovations that support cryptocurrency, building on the foundations of legacy finance, banking, and other systems that facilitate money and all its uses.
As crypto is still in its very early stages, we’ve only just begun.
Concerns About Crypto as Money
For all the valid points supporting cryptocurrency as real money, there are plenty of downsides to crypto consider.
Economists, governments, central banks, and everyday folks have questioned crypto as a legitimate form of currency, and rightfully so. After all, cryptocurrency as a concept has only been on the radar for about a decade, and anything innovative or disruptive is met with skepticism.
The main argument against crypto as money is one of adoption and support or lack thereof. By far the most popular cryptocurrency, Bitcoin is only accepted as payment in a few corners of the economy, and the majority of vendors don’t seem eager to start.
There are also issues with the crypto user experience and ease of access, which are still rough around the edges.
The rise of centralized exchanges like Binance and Coinbase has helped. However, most people are still inexperienced in wallets, keys, and the process of actually using crypto as money.
Finally, crypto users face the harsh realities of massive market fluctuations happening daily, which shows that crypto is not necessarily the best unit of exchange for everyday use.
“Stablecoins” have shown promise as a counterpoint here, but adoption is still the main issue with crypto tokens and coins across the board.
How Crypto Is Currently Used
With a market cap hovering around $2 trillion, what is all the world’s cryptocurrency being used for? If it’s not considered “real money” yet, crypto still has plenty of practical uses driving global interest.
Store of Value
You’ve likely heard the term “digital gold” used to describe Bitcoin, and with parallels to crypto mining and the intrepid attitudes of industry leaders, the expression is a perfect fit.
Even if Bitcoin isn’t well suited as an everyday unit of exchange, it makes for a fantastic store of value for those hedging against inflation and economic uncertainty.
Apps and Marketplaces
Tons of popular apps use crypto tokens – typically based on the Ethereum network – and are ushering in a new era of decentralized finance, also known as DeFi.
While DeFi is very rudimentary and risky, its user base is increasing rapidly, with new concepts and companies popping up each week.
With use cases like lending, staking, investing, and more, DeFi is a promising frontier for the future of finance and how crypto can eventually become a more legitimate, trusted form of money for the masses. Imagine making most future purchases entirely in crypto.
Institutional Support
Only a handful of governments have taken the crypto leap in a big way, but countries like El Salvador show that crypto does indeed have a future as a legal form of currency.
Mapping the Future of Crypto
What are the next steps for crypto as a technology and a type of real money? That’s what miners, investors, holders, and speculators all want to know. Here are some trends to watch.
Mining Opportunities Expand
The crypto mining space is gaining momentum as a large and dynamic industry, with some companies turning to renewable energy to power their growing operations.
Increased investment and competition in mining show that interest and adoption in crypto are still on a steady upward trajectory.
New Digital Assets Emerge
For all the talk about Bitcoin and Ethereum, let’s not forget about the thousands of altcoins vying for market share 24 hours a day.
Pay attention to any cryptocurrency exchange platform, like Gemini, and you can see on any given day just where the crypto market is moving.
Which altcoin will be accepted as a stable and secure form of money moving forward? Will it be Dogecoin or Litecoin or some other cryptocurrency? Keep your eyes on the market, and stay tuned.
Money and Tech: On the Move
Cryptocurrency is many things, ranging from experimental tech to a store of value or simply tokens for games and digital art galleries.
But is crypto real money? That’s for you to decide and determine whether you want to jump on the crypto bandwagon. From our perspective, the future of crypto is bright, regardless of what happens in the short term.
Sources:
Is Crypto Real Money | The Mercury News
What are the disadvantages of cryptocurrencies? | Prescouter