Monday, August 31st, 2020
If you don't want to get too technical, think of cryptocurrencies like precious metals. Not only because you can mine them like you can gold, or copper, or silver, but also because different cryptocurrencies can serve different purposes in the same way that different metals can serve different purposes.
But while the precious metals industry is already mature, and we mostly know what different metals can be used for and how much they're worth, the cryptocurrency industry is still young, and we're still trying to determine the various use cases of all these coins.
There are currently thousands of different cryptocurrencies, and they're all trying to be useful in their own ways just like gold, copper, and platinum are each useful in their own ways.
Some are trying to be digital cash, while others can be classified as security or utility tokens. In this article I want to focus on that first category of coins, those that are striving to be the money of the future.
I'm talking about coins like Monero, Zcash, Dash, Litecoin, Bitcoin, and Bitcoin Cash, among others.
As of today, we have no idea if any of these coins are ever going to be widely used as money. Who knows, maybe the money of the future isn't a cryptocurrency at all. Maybe it ends up being a centralized solution like Facebook's Libra, or the digital Yuan, or USDC.
But cryptocurrencies have one huge advantage over centralized solutions like the ones above. Bitcoin, even though it's not backed by a government or some huge corporation, is almost impossible to shut down exactly because there isn't a central point of failure making it vulnerable to attack. For that same reason, transactions can't be censored because even if you could take down some nodes, you'll never take down all of them.
By combining cryptography, computer science, and economics, Satoshi Nakamoto solved the double-spend problem, and in doing so, for the first time in history, we have a technology that enables us to have a form of money that doesn't need to be controlled by a central authority. This means that also for the first time, we have the ability to separate money from the state, and we finally have the ingredients to enable a truly free market. As economies around the world fall one after another into hyper-inflation, imagine if there was another choice, a currency that isn't controlled by anyone, that can't be printed and devalued at will. That's the promise that cryptocurrencies offer.
Except that even if the world might be ready for crypto, crypto isn't quite ready for the world.
Visa handles over 150,000,000 transactions per day. Bitcoin handles a little over 300,000.
Because cryptocurrencies are distributed rather than centralized, it's a lot harder to scale these systems to handle the billions of financial transactions that happen daily. As such, cryptocurrencies are still far from finished products. It's why every coin has development teams working hard to figure out the necessary solutions to allow these coins to work on a global scale.
While cryptocurrencies may have certain properties like censorship resistance, and a capped supply, both of which the US dollar lacks, no cryptocurrencies can compare in terms of the number of places where the dollar is accepted, or the amount of infrastructure already in place.
Crypto still has a long way to go. There are no guarantees that the promise will be fulfilled, but it's a part of what makes this industry exciting.
Imagine discovering precious metals for the first time. Digging in the ground and finding shiny deposits of gold, or silver, or copper, and trying to figure out exactly what they are, and how to use them, and which ones will be the most valued.
At this point it's still up in the air which coin will win. BTC likes to call itself digital gold, but who knows, maybe it ends up only being fool's gold.
All of us are just buying into the unknown so far. No one knows which coin will conquer the many technological hurdles that still remain and ultimately prove itself as the most useful, and the most valuable, but I believe that Bitcoin Cash is still the fork of Bitcoin that has the best chance to one day become peer-to-peer electronic cash for the world. Why else would this community constantly be debating, and arguing, and evolving? Because that's something worth fighting for.
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