What are the benefits of
Cryptos and what
problem do they solve?
The new digital revolution of money.
Cryptocurrency has many appealing benefits. Some of this is thanks to the
blockchain technology previously mentioned. It is a strictly monitored process
with encrypted transaction and control.
A quick history of money
Since the beginning of human time, people have used something scarce as a
source of value. At the start they used bartering one object for another. But
how can you buy a cow if you only have two chickens? A third entity was
needed, so they used the scarcest of seashells. Then came coins made of
precious metals. At the beginning, coins did not have a value stamped on
them, rather the coins were weighed. Only later was an actual value stamped
onto the coin.
Next was paper money backed by precious metal e.g. Gold. The idea was that
you could literally walk into a bank and ask for the equivalent of your bank
notes in Gold. Then paper was taken off the Gold Standard and was not backed
by anything, allowing the printing of money to flourish. This is the current ‘fiat’
moneyThe problem is that fiat money is not scarce. More money can be printed and
so every year it is worth less and less. The only store of value that retains its
value is Gold. But Gold is not easy to store, not easy to sub-divide and not easy
to transport.
For a full breakdown of the timeline of the History of Money, see Appendices.
Scarcity is an essential part of cryptos. Take the largest, Bitcoin for example. As
already stated, only 21 million will ever be made, so scarcity is part of the
system.
. No Third-Party Involvement
There’s always a process you go through when using traditional money to buy
yourself a new property, set up your own business or buy a new car etc. One
way or another, the process requires a third-party involvement. We are talking
lawyers, owners and some other external factors such as delays,
documentation, extra fees etc. This in general will consume unnecessary time,
money and energy to the point of giving up in some cases.
Recently, I wanted to send some money over to the USA. In order to do that, I
had to pick up the phone to my bank. I was stuck in a queue listening to music
for over eight minutes just to start the process. I was then charged for sending
the money plus an extortionate Foreign Exchange rate which did not resemble
the real rate. Finally, since the transaction was via something called an
intermediary bank, I was told that they would likely charge me as well,
although they could not tell me how much. The money, I was told, would be
there within 3-5 working days. Since it was a large amount of money the whole
thing probably cost me over $200 if you include the Foreign Exchange spread,
maybe more. I agreed to everything because, well, I didn’t have many
alternatives