Ever since the first cryptocurrency, Bitcoin started becoming popular, there has been a question everybody has been asking – “Is Cryptocurrency Money?”
This has been the cause of many arguments that still keep going on after almost a decade of the existence of cryptocurrencies. This debate is actually more problematic than the complexities of the cryptocurrency world itself. Arguments exist on both sides that can make the scales tip in the favor of either direction. There are many things to note about either one being correct but there is a lot about your perception of it as well.
When you’re asking the question “Is cryptocurrency money?” you’re essentially comparing it to real money and deciding in that context, right? Then let’s take a look at a few qualities that both fiat currencies and cryptocurrencies share. Maybe that will help you decide better for yourself whether or not cryptocurrency is money.
Medium of Exchange
When you look at cryptocurrencies and fiat currency, both are at the same level in terms of being mediums of exchange. In some cases, cryptocurrencies actually serve as better mediums of exchange since they allow you to buy some things (illicit goods and services on the dark web) which you cannot with traditional currency. Why? Well, because fiat currency is much easier to track in terms of cash flow in comparison to cryptocurrencies.
In the debate “Is cryptocurrency money?” the aspect of counterfeit definitely puts cryptocurrencies as being better than traditional currency. You cannot counterfeit with cryptocurrencies since all of it is based on cryptographic puzzles being solved to make, transact and approve validity of transactions. The blockchain technology ensures there are no problems of “double-spending”. Permanence of Transactions
When you’re considering “Is cryptocurrency money?” and you look at the fact that transactions with cryptocurrencies are permanent, you will lean more towards being in favor of fiat currencies. If you happen to hit the send button and send cryptocurrency units to the wrong address, you cannot undo the transaction.
In terms of durability, it’s needless to say that cryptocurrencies are the winners if you’re asking “is cryptocurrency money?” You see, cryptocurrencies do not have a physical form. They are only in the digital realm as records in a ledger. There is no possibility of them physically deteriorating unlike with paper money.
When something is fungible, it means that it is an item which can be exchanged with another item that is of the same kind without any loss or profit. The real key factor determining fungibility for a unit of exchange is that it is being used in an operating environment where it is accepted for trade and exchange.
Cryptocurrencies happen to have an edge over fiat currency in that respect. This is to say that cryptocurrencies are essentially tradable wherever they are accepted. When it comes to fiat currencies, they can only operate within their own environments.
Is Cryptocurrency Money?
Well, the last thing to consider is the intrinsic value. That’s what gives value to a medium of exchange right? Now, keep up. Many anti-crypto folk argue that cryptocurrencies do not have any value of their own except that of the trust placed in them. While that is true, it’s also important to point out that fiat currency had intrinsic value when it was backed by gold. That’s how it came into existence anyway. Right now the value of fiat currency is based on credit rather than gold so does that not put it on a similar boat as cryptocurrency? It is our trust in the system controlling the flow of fiat currency that gives value to it and it is the trust we have in cryptocurrencies that gives value to them.
Now that you have a bit of both sides of the argument, what do you think? Is cryptocurrency money?