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Can Cryptocurrency Substitute Fiat Currency?

Manoj Nair




Cryptocurrencies came into existence as a result of the inadequacies of the present financial regimen. Crypto came into existence in 2009 and has made gargantuan progress. Numerous retailers and outlets have started accepting cryptocurrency as a currency and government are finding ways to tax and regulate them. The launch of cryptocurrency and the Blockchain ecosystem and its versatility is encouraging businesses and entrepreneurs to create new technology, products and services. The decentralized finance structure is based upon the Ethereum blockchain and ecosystem which seeks to amalgamate the emerging “metaverse” and digital and physical lives.

While Fiat Currency has been in existence for a long time and has been tried and tested and there are tools which can help the government to regulate the currency so that it contributes in a positive way to the economy.

Fiat Currency Woes That Crypto Adresses

The fiat currency has fulfilled the requirement as a tool of commerce for more than millennia. However the rapid advance in technology has made the need for real or physical currency irrelevant and today people can transfer money with cards and other modes. However these modes cost money and involves third parties who have often employed unprincipled practices and contributed to global financial crises. Involvement of third parties often forces the necessity of trusting someone else with your money.

However cryptocurrencies negates the need to have a third party to verify the transactions. Every entity in a blockchain is credited or debited correctly because automated consensus process verify transactions and store the information in an irreversible way.

If Cryptocurrency Replaces Fiat What Will Be The Effects

Cryptocurrency is truly global and transcends borders and regulation. It is like a double edged sword which can protect as well as destroy. There are positive and negative aspects of cryptocurrencies completely replacing the fiat currency. Cryptocurrencies are not regulated or controlled by central banks like fiat currencies. Central Banks can control and   influence inflation and employment by adjusting variables like interest rates and open market machinations. Decentralized Cryptocurrency does away with these tools. Therefore in its present state consumers don’t have any protection if crypto was to replace fiat currencies. Therefore the effects of cryptocurrency replacing fiat currency must be explored and evaluated.

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