Dearest readers, most of us grow up and find out that progress does not always take us forward, that newer is not always better, and that brave astronauts and colonists going off to Mars some day will depart Earth that has Ancient pyramids, Medieval castles and the Empire State Building. Most Western countries have democratic systems with elections and presidents, yet many of our leaders get picked from hereditary circles of political elite- the nobility of our times. We live in a world that tries to avoid wars at all costs, yet we have countries doing punitive expeditions just as the Roman Empire used to do to friends and foes alike. Why am I talking about this? I am talking about this because I spent the last few months observing cryptocurrencies and the buzz around them including all different levels of understanding as to how they work, which ones may go to the Moon next, and what their future is altogether. In almost everything I have seen and heard, there is a near complete absence of understanding which elements of the current and old financial systems the cryptocurrencies will inherit. Here, I would like to provide some ideas that may put cryptos into a better perspective and offer either new insight or confirmation that if you have been thinking along the same lines, you are not alone. Not a financial advisor, just sharing some interesting theories :)
First, I would like to introduce a term called cryptodollar. By this, I do not mean a crypto version of fiat US dollar, but rather a term that comes from the concept of petrodollar. As most international transactions are being done in US dollars, the same goes for oil. Basically, the US dollar is the default currency on which global oil trade is largely based. Therefore, in the crypto world we will need a cryptocurrency with which you will be able to buy most other cryptocurrencies and vice versa. I would say ethereum may become our cryptodollar. As long as ethereum keeps getting upgraded and its transaction costs remain reasonable, it will fulfill that role well. Also, as long as a cryptocurrency can be exchanged for ethereum at a reputable exchange, that ability in and of itself will give that cryptocurrency its validity and usefulness. So, if you have ethereum, you would be able to exchange it to cryptos best suited for different purchases of various goods and services- picking cryptos with appropriate transaction costs and unit size (something that is not tens of thousands of dollars per unit). This is especially important because even a crypto coin that is worth $1 is too large for certain daily transactions in developing countries where people can have the ability to transact with crypto but they are still developing in other ways and goods and services there are cheap.
Now, what will give ethereum legitimacy? Well, for the longest time, US Dollar was tied to the gold standard. Bitcoin is already called crypto gold, and if you look carefully the entire cryptocurrency sector depends not just on Bitcoin's value, but also its increasing adoption and success milestones. Therefore, Bitcoin could be seen as the crypto standard. As long as you have a crypto coin that can be exchanged for ethereum, ethereum can be exchanged for bitcoin, and bitcoin does well in the world as well as retains its ability to be exchanged for fiat currency, the system will be adopted more and more and wider adoption will increase its legitimacy, and more importantly the faith in it and crypto coins as a whole.
Speaking of faith, why on Earth would anyone think that the concept of fiat currency would not translate to cryptocurrency? So, let us introduce the concept of fiat cryptocurrency, with Doge coin being a recent and prime example of a fiat crypto. When people choose to believe in a crypto, put fiat currency (e.g. CAD) into it, then it gets listed on a reputable and pickier exchange, can be exchanged for ethereum and/or bitcoin, I believe it becomes a fiat cryptocurrency. Oh, and here is a theory that could really blow your mind. We will need lots, lots and lots of fiat cryptocurrencies! Do people still really think all the fiat currency will eventually pumped into bitcoin? What about transaction speed, unit size, transaction costs and the size of global demand? What about buying a bag of flour in Ghana, or Starbucks coffee in Toronto, or a McDonald's burger in Osaka? What about mortgages, stock markets' daily volumes, credit? If we really want to completely replace fiat currencies (both paper and digital fiat money), do we really believe we will do it with just bitcoin? How? Why? You will use any and all cryptos that consumers and businesses deem fiat based on the criteria I suggested plus most likely some others as well. As such, it may be entirely pointless to pitch any current crypto as a winner takes all or as the next bitcoin because this may be useless. The only thing you may want to try to guess is at what fiat currency value- e.g. USD- each fiat crypto coin will stabilize. Which will stabilize around a million, ten thousand, one hundred dollars, or as little as a dollar etc.
So there we have it, dearest readers- cryptodollar, crypto standard and fiat cryptocurrencies. What do you think? Let me know :)
First, I would like to introduce a term called cryptodollar. By this, I do not mean a crypto version of fiat US dollar, but rather a term that comes from the concept of petrodollar. As most international transactions are being done in US dollars, the same goes for oil. Basically, the US dollar is the default currency on which global oil trade is largely based. Therefore, in the crypto world we will need a cryptocurrency with which you will be able to buy most other cryptocurrencies and vice versa. I would say ethereum may become our cryptodollar. As long as ethereum keeps getting upgraded and its transaction costs remain reasonable, it will fulfill that role well. Also, as long as a cryptocurrency can be exchanged for ethereum at a reputable exchange, that ability in and of itself will give that cryptocurrency its validity and usefulness. So, if you have ethereum, you would be able to exchange it to cryptos best suited for different purchases of various goods and services- picking cryptos with appropriate transaction costs and unit size (something that is not tens of thousands of dollars per unit). This is especially important because even a crypto coin that is worth $1 is too large for certain daily transactions in developing countries where people can have the ability to transact with crypto but they are still developing in other ways and goods and services there are cheap.
Now, what will give ethereum legitimacy? Well, for the longest time, US Dollar was tied to the gold standard. Bitcoin is already called crypto gold, and if you look carefully the entire cryptocurrency sector depends not just on Bitcoin's value, but also its increasing adoption and success milestones. Therefore, Bitcoin could be seen as the crypto standard. As long as you have a crypto coin that can be exchanged for ethereum, ethereum can be exchanged for bitcoin, and bitcoin does well in the world as well as retains its ability to be exchanged for fiat currency, the system will be adopted more and more and wider adoption will increase its legitimacy, and more importantly the faith in it and crypto coins as a whole.
Speaking of faith, why on Earth would anyone think that the concept of fiat currency would not translate to cryptocurrency? So, let us introduce the concept of fiat cryptocurrency, with Doge coin being a recent and prime example of a fiat crypto. When people choose to believe in a crypto, put fiat currency (e.g. CAD) into it, then it gets listed on a reputable and pickier exchange, can be exchanged for ethereum and/or bitcoin, I believe it becomes a fiat cryptocurrency. Oh, and here is a theory that could really blow your mind. We will need lots, lots and lots of fiat cryptocurrencies! Do people still really think all the fiat currency will eventually pumped into bitcoin? What about transaction speed, unit size, transaction costs and the size of global demand? What about buying a bag of flour in Ghana, or Starbucks coffee in Toronto, or a McDonald's burger in Osaka? What about mortgages, stock markets' daily volumes, credit? If we really want to completely replace fiat currencies (both paper and digital fiat money), do we really believe we will do it with just bitcoin? How? Why? You will use any and all cryptos that consumers and businesses deem fiat based on the criteria I suggested plus most likely some others as well. As such, it may be entirely pointless to pitch any current crypto as a winner takes all or as the next bitcoin because this may be useless. The only thing you may want to try to guess is at what fiat currency value- e.g. USD- each fiat crypto coin will stabilize. Which will stabilize around a million, ten thousand, one hundred dollars, or as little as a dollar etc.
So there we have it, dearest readers- cryptodollar, crypto standard and fiat cryptocurrencies. What do you think? Let me know :)