Pocket full of Crypto might!
It all starts with one simple phrase, ‘that’s where the money is’, and everyone turns right!
In case you have not noticed, a lot many are turning towards crypto currencies made famous by the top 3 most talked about and invested in : Bitcoin, Etherium & Dogecoin but now the list runs in thousands.
I would not get into the what is crypto because there’s enough and many people who have explained that but I would like to talk about the differences or the lack thereof between Fiat and Crypto currencies and the dwindling distance between them, or so it seems.
Fiat is government backed and printed “legal tender”. It can be physical or virtual as in electronic/digital - the usage of the latter as we know has increased phenomenally over the last few years.The supply of this currency is controlled by the government and you pay taxes on it and with it.It’s unlimited in supply because all the government has to do is print more.
Cryptocurrency is not backed by any government or bank, and thus is de-centralised and not controlled by a government but an algorithm and you pay taxes on it but not with it.
A cryptocurrency could have fixed/limited or open supply.
While Bitcoin was intended and launched as a peer to peer digital payments, cryptocurrencies are now being recognized and therefore used for transactions on digital platforms that could be used for the physical world as well. Some of the known companies that started to do so are :
Microsoft
PayPal
Square
Shopify
Twitch
KFC
T-Mobile
NBA
Lamborghini(!)
Pacaso (Real estate)
Tesla had begun accepting Bitcoins for car purchases but discontinued to do so, thus wiping off a a substantial value from the crypto market.
So the usage of cryptocurrencies as an alternative means to get you by is not theoretical anymore and the question is not if or when but how soon, how many companies and governments will find a way to create intersections of this parallel economy in the making with the regular economy and link to GDP and what not for the average economist to comprehend the real economic state of any country and it’s people.
As of now, the only intersecting point is capital gains tax on selling crypto and converting it to recognised currencies.
Despite the fear of regulations unknown/usage bans and the highly volatile nature of these currencies, several people have taken to this new asset class - over 100 million people in India have pottered about with buying/holding/selling one or more such currencies in the last couple of years alone. As a result, India has the highest number of cryptocurrency owners in the world and most of these people are under 35 years of age.
Riding on this wave of owning and getting rich via crypto trading, is another wave in the making and that is NFT (Non fungible tokens). NFT can be described as (source - Wikipedia):
A unique and non-interchangeable unit of data stored on a digital ledger (blockchain) that can be used to represent easily-reproducible items such as photos, videos, audio, and other types of digital items(files) as unique items (analogous to a certificate of authenticity), and use blockchain technology to establish a verified and public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.
Simply put, any form of digital content with unique characteristics can potentially become NFT.Currently, generative art and gaming are the biggest space, followed by digital versions of artists’ (including actors, singers, etc) content.Emails, articles and even law papers are surfacing up as NFTs up for grabs.
A few leaps forward and we bum into the concept of Metaverse (a term coined by Neal Stephenson in his 1992 novel -Snow Crash) which is a future version of the internet constituted by shared (community) virtual spaces in 3D - so everything Internet but constructed in augmented reality. The concept is not new if you have heard of Second Life which was launched back in 2002.
Metaverse is where crypto would play a key role in financial exchanges and transactions as more and more people get lured into the virtual paradigm and need the monies to be able to construct and get by in Web3.0 - which is another name for it, if you’re not confused yet.
So really, cryptocurrency as a tool for financial transaction, economics and capitalism might not even need to cross over in the physical world but eliminate the need for government controlled currencies in the new internet order.
The question is, how far down the road can governments kick this can before they get into the middle of it all by crafting the standards and frameworks that solve for understanding, volatility and the scatter of currencies out there.