The adoption of cryptocurrencies will soon be widespread. This is the conclusion if common sense prevails.
Is Cryptocurrency Poised for Success? Currency was born to add convenience to the old barter and exchange transactions in which each part of the transaction had its value (in a typical transaction, a trader would exchange a chicken for a rabbit). Nevertheless, the evolution from exchange and barter to currency would not have an easy adoption initially; let us imagine the seller of the rabbit who, in exchange for his rabbit, was given a small piece of circular metal; it would probably not be too easy for him to understand and, even more difficult, to trust that the small amount of metal was equivalent to the value of the rabbit.
In any case, legal tender eventually had widespread adoption when societies adapted currency valuation to the gold standard. People could measure the value according to a consigned amount of gold the issuing bank could give the coin holder. The gold standard, however, was abandoned after the Great Depression of 1929 to prevent prices and wages from falling due to a generalized drop in demand and was replaced by the fiduciary standard (the current one), as its name indicates (fiducia means trust), on the confidence that the entity issuing the money (the issuing bank) can respond for the money issued.
Nowadays, we know that this is not so. After a generalized pandemic, the issuing banks started printing money to avoid a global collapse of the economy. Now, some months later, we are beginning to notice the consequences of the impossibility of some banks facing the withdrawals of their clients’ deposits.
A social change
Leaving aside this situation, every social or economic change throughout the history of humankind has always involved major adoption problems as human beings are naturally resistant to change, so the shift from physical to digital currency will also be complex. However, according to the digital statistics portal Statista, the adoption of digital currencies in Western countries already exceeds 11% of the population, which is not insignificant.
Contrary to what most people believe, digital money/cryptocurrencies (please, do no not confound digital money to CBDCs) weren’t born to be a speculative tool or evade taxation. The ability to avoid taxes on digital currencies is equal to that of fiat money. Both are decentralized distributions. If people make fiat transactions without bank transfers, no one knows the path of that money. In the case of digital currencies, the same occurs. No one knows the path of that money except the blockchain itself, on which these digital currencies circulate.
Decentralization
To understand the reason for digital currencies, we must first understand what decentralization is, currently framed within the blockchain: The first digital currency was born in 2008 precisely as an alternative to traditional money, looking for a liberalization framework that would give them:
- A lower transaction cost (since there are no intermediaries, this cost is meager compared to conventional currencies).
- Greater transparency since the system records the transactions into a freely accessible registry (Blockchain).
- Greater security since each coin belongs to only one registered owner.
In recent weeks, some banks’ collapse due to issuing more money than they could cope with generated a constant migration from currency to digital cash or cryptocurrencies. To try to stop this migration and cling to power, since decentralization radically removes them from the equation, thus becoming unnecessary actors for transactions between individuals, the big banks are designing their digital currencies, the famous CBDCs (Central Bank Digital Currency, as are the digital euro and the digital dollar).
Indeed, they will be digital currencies of centralized issuance (issuing bank) but also centralized distribution (the issuer will always know and may even veto the movement of this currency), which generates a considerable lack of freedom and a very dangerous alienation, with which, we believe that as the people, after all, is sovereign (who finally decides) common sense will prevail. People’s general adoption of cryptocurrencies will soon happen.
What happened at Bretton Woods?
The Bretton Woods Conference occurred in 1944 in Bretton Woods, New Hampshire. There, representatives from 44 countries gathered to discuss the international monetary system. The conference happened during World War II. It aimed to create a stable economic system to prevent the financial instability that led to the Great Depression. At the conference, the attendees agreed to establish a new monetary system based on the US dollar. The US dollar was pegged to the price of gold, and other currencies were pegged to the US dollar. Everybody knows this system as the Bretton Woods system.
Under the Bretton Woods system, countries maintained a fixed exchange rate with the US dollar. If a country’s currency became too weak, it could ask for a loan from the International Monetary Fund (IMF) to help stabilize its currency. It is worth noting that the IMF also originated from the Bretton Woods conference. The Bretton Woods system was successful for several decades but unraveled in the 1960s. The US was running a large trade deficit, and other countries began to worry that the US would not be able to maintain the value of the US dollar. In 1971, President Richard Nixon announced that the US would no longer exchange dollars for gold. This action effectively ended the Bretton Woods system.
Despite its eventual demise, the Bretton Woods system was an important milestone in international economic cooperation. It helped create a stable monetary system that prevented the economic instability that led to the Great Depression. The IMF, built during the conference, continues to provide loans and financial assistance to countries worldwide.