Is Cryptocurrency More Valuable than Cash

Is Cryptocurrency More Valuable than Cash?

Just like conventional currency, Bitcoin is a medium of conducting transactions. Before we understand if Bitcoin and cryptocurrencies are valuable than conventional currency, we must understand the benefits of Bitcoin over the conventional currency.

Advantages of Bitcoin

Trackable

Bitcoin is trackable. This is done through the blockchain. Millions of computers keeping a copy of all the transactions that ever occurred in the bitcoin network allow anyone to track any transaction in the network. Besides the obvious benefit of tracking a transaction, this has many other useful implications.

Decentralized

Cash is controlled by banks and financial institutions. Therefore it is centralized. Bitcoin, on the other hand, is completely decentralized. No one party controls the flow of bitcoin. No one party manages it, and most importantly, no central point of failure. As a result, Bitcoin is faster, cheaper and secure than cash. Fiat currencies are controlled by central banks. You are forced to pay taxes. These banks can punish you if you disobey their rules. Central banks have the power to create, transfer and regulate money.

Lower transaction fees

Compared to credit cards and debit cards, transaction fees are significantly lower.

Impossible to Duplicate

Cash can be duplicated. Bitcoin is impossible to duplicate.

How Cryptocurrency Beats Cash

Is Cryptocurrency More Valuable than Cash

Be it cash, cryptocurrency, or any other form of currency, why would anyone consider it valuable? It is because you and I mutually agree it has value. As more and more people start using cryptocurrency, it becomes a recognized medium of exchange. This is what makes cryptocurrency valuable just like any other currency.

A cryptocurrency like Bitcoin has a limited number of coins in circulation. There will be no more than 21 million Bitcoins in circulation unless Bitcoin’s protocol changed to allow a larger supply. In Bitcoin after 21 million Bitcoins, as demand increases, supply does not grow. When this happens, the value of a single coin increase.

Bitcoin is very divisible. You can own small fractions of a coin. Little as 0.00000001 BTC. The smallest unit of the Bitcoin is called a Satoshi. As stated above, having a finite number of Bitcoin in circulation can increase the value of the coin, thanks to the rules of supply and demand.

How Cash Beats Cryptocurrency

Volatility

Is Cryptocurrency More Valuable than Cash

Bitcoin and other cryptocurrencies are very volatile. Cryptocurrency is volatile mainly because of these reasons:

  • Negative Bitcoin news – News statements from governments stating how Bitcoin is likely to be banned or regulated. This can create fear among Bitcoin owners and force them to go on a selling spree.
  • Low Liquidity – Low liquidity is another factor that contributes to volatility. Movements in the market appear severe due to low liquidity.
  • Regulation – Regulation contributes to volatility as well. Banning of ICOs or regulating exchanges can lead to huge movements in the market.

This is where cash is still king. In terms of volatility, cash is your best option compared to cryptocurrency.

Adoption

Cash is accepted almost everywhere. Bitcoin and cryptocurrencies, on the other hand, is accepted by only a few businesses and individuals. In terms of adoption, cash out-revivals Bitcoin and cryptocurrency by a huge margin.

This is because there is no major advantage to using Bitcoin over cash when buying something from your local store. Cash or credit/debit card works just fine. Besides, paying with bitcoin is not simple like cash or credit/debit card. Paying with Bitcoin involves having to know the public key, requires an internet connection, typing and waiting for confirmations.

But, Bitcoin and cryptocurrency are advantageous to those who do not have a bank account. The majority of people in the world, do not have a bank account. Cryptocurrency is an alternative solution for the unbanked. In terms of fees, security, and speed, cryptocurrency is king over bank transfers.

Adoption is one factor that contributes to the value of a currency. In terms of adoption, cash wins.

Intrinsic Value

Is Cryptocurrency More Valuable than Cash

It is said that Bitcoin and cryptocurrency have no intrinsic value. Intrinsic value simply means that, if you ignore the current trading price, what is the underlying value of the currency. As Bitcoin is not backed by anything, and based on speculation, people say that Bitcoin does not have intrinsic value.

But, guess what? Fiat currencies do not have intrinsic value either. The value of the fiat is maintained by government regulation or people engaging in exchange, mutually agree that fiat has value.

To function successfully as a currency, it needn’t have intrinsic value. The notion that a currency must have intrinsic value, comes from our early experiences of commodity money like gold, silver and, salt.

To function successfully as a currency what needs to happen is widespread adoption and acceptance. As more and more people start using currency as a medium of exchange and start accepting payments in that currency, the value of that currency, increases.

Bitcoin and other cryptocurrencies have to compete with fiat and other commodities to gain its value. If more and more people start accepting cryptocurrency as payments, the value of it increases. In the age of globalization, cryptocurrencies have a great chance of doing that.

As of now, fiat usage is enormous compared to Bitcoin. In terms of usage, fiat wins.

Conclusion

So, is cryptocurrency more valuable than cash? As of now, no. Because people do not perceive cryptocurrency to be more valuable than cash. It is only a change of perspective. As more and more people start accepting cryptocurrency as payments, the value will be increased.

The majority of people haven’t heard of cryptocurrency and it is difficult for some to understand. People fear what they don’t understand. Bitcoin and other cryptocurrencies have great advantages over fiat. Lower transaction fees, decentralization, transparency, immutability are few amongst many. Besides, having a limited supply of 21 million bitcoins and an ever-increasing demand can increase the value of the coin.

Cryptocurrency can beat cash in terms of value if cryptocurrency usage becomes widespread. The advantage of volatility, adoption, cash has over cryptocurrency is mainly due to its widespread usage. It only takes a change in perspective.

Spread the love