What is money/currency? Breaking it down to understand Cryptocurrency.
Money and currency tend to get used interchangeably in our conversations and they appear to be synonyms but they truly are not. Under the technical use of the words the coins and paper bills we carry are currency and physical representations of money but they are not money itself. Money itself is purely numerical, it is numbers, it is abstract- you can’t smell nor touch money. Money is the value of the goods or services that we trade for, its value is intrinsic in what is being traded. Money is the store of value and value increases as money increases.
Currency on the other hand does not have value in itself nor does it store value but it is tangible you can feel it, touch it, smell it. Currency is a medium of exchange for getting the goods and services we need. It allows for convenience of not having to exchange multiple times with multiple people to acquire what it is we are looking for. Currency simplifies the trading process. Currency is considered to be any form of money that is circulated in public. It is a promissory note that is presented in the form of currency for a stated value of money.
Is cryptocurrency as valuable as fiat currency? To determine this we have to see if it meets the conditions of currency as well, or better than fiat currency and we would have to look at the individual currencies to get a true picture of this. We also have to take into factors of inflation and deflation of that currency and how easily the currency’s value can be changed.
Value of currency is determined by the demand for it. The first measure of a currency’s value is how much it will buy in another currency that is known as a currency’s exchange rate. It takes in account supply and demand and its expectations for the future. Foriegn governments often hold other fiat currencies in reserve, the more they hold the lower the supply of that currency and the more valuable it comes. If governments were to suddenly rid themselves of a particular currency then it would be worth a lot less and likely collapse. At least in a centralized system of banking like we are most familiar with today.
Currency has traditionally been represented as the physical representation of money. Currency- usually speaking of fiat currency is “cold hard cash”- dollars, pesos, yen that you keep in your wallet or purse. It is a country’s primary medium of exchange in the form of paper and coins.
Most are not the digital money known as crypto currency. Although, that is starting to change as awareness of it grows and exactly what it is and how it works. Currency is actually only a small amount of the overall money supply, much of money exists as credit money or not even as printed money but just merely as numbers on financial ledgers. Pretty wild, right?
Gold, silver and other metals were heavy and cumbersome to transport as were gems that might be traded. Currency made trading easier with using this cold hard cash as an accepted form of payment, cryptocurrency makes it even less cumbersome but there’s nothing to hold on to physically it’s all digital though you should definitely take security measures and protect it as if it is a physical wallet. Being backed by governments this currency became known as “legal tender” for use in debts and could also be used in paying debts to the government for things like taxes. Most governments today do not yet accept cryptocurrencies yet they are starting to come around as the technology becomes more prevalent and there are several with their value tied to the US dollar or Federal Reserve Note that we use today. People accepted this because their money was once backed by gold and silver. That’s right, people agreed to use USD/Federal Reserve Notes because it was backed by gold or silver. On December 23, 1913 the Federal Reserve was created when President Woodrow Wilson signed the Federal Reserve Act into law.
One day though, the government decided they were no longer going to back our currency with gold or silver and in 1933 President Roosevelt and congress began taking the US off the gold standard. Maybe we should be grateful two years later they gave us our now crippled social security system, there’s something about seven generations somewhere- we were sold out. That’s a slightly different topic, so many things are connected but I will have to leave them for elsewhere in hopes this doesn’t seem to scattered. This meant that US citizens no longer could demand gold in payment for their currency. Before this time a US citizen could go exchange their USD/FRN (Federal Reserve Notes) for an equal amount of gold but this all changed when Roosevelt and congress decided to take us off the gold standard. At the same time the government required all citizens to deliver all silver and gold coinage that they owned to the Federal Reserve and it could be exchanged for a predetermined price which was first set at $20.67 an ounce and then later at $35 an ounce. Wait! What? Yes, really. You didn’t know all that? Once again the joke is on the US citizens and the government has used us as pawns and defrauded us changing the rules of the game. No wonder so many things seem broken or skewed to the wealthiest 1% in our society.
Strong economies with their own currencies will find their currency is seen as strong in these centralized systems. So, how does it work when it is all decentralized? How is the value held? What keeps it from crashing altogether especially if it was to become the primary method of paying for things- decentralized as in cryptocurrency or gems or gold? How do you activate a system the people will willingly engage in when they fear it? Yet ultimately it will return them their power? With great power comes great responsibility. How many people do you know that are really ready to take responsibility?
So, to sum this up people accepted fiat currencies because they were backed by gold or silver. They could exchange these fiat currencies for gold or silver at any time. Suddenly the government says no more we don’t want to do it this way. By the way, bring us all your gold and silver and we’ll give you some fiat currency for it. Now the government has all the gold and silver and it’s not using it to back the money- the gold standard was completely abandoned by President Nixon in 1971. With the control of all the gold and silver now the government could control inflation and deflation and the economic system of the country, we become pieces in the monopoly game of our country’s economic system.
Certainly economics is a part of all countries. However, don’t forget the Creature from Jekyll Island and that our country does not own the Federal Reserve. We no longer have our gold and silver, the thing that trades at a stable value, it will still buy today what it would buy in 1933 when we were told to give our gold up for $20.67 back in 1933 interestingly that ounce of gold should be worth much more as the rate of inflation is every dollar in 1933 should equal 20.67 today, it also shows that maybe things are skewed to hide the true rate of inflation when really considering things as an ounce of gold is worth much more so statistically speaking I think the figures below are not really an accurate reflection of the rates of inflation as an ounce of gold today is worth $1913. I looked at various online resources which pegged the dollar values in the same general area as below but I don’t think it really adds up if you consider the gold standard.
When the price of things you need to buy like food and gas goes up, the value of your currency goes down. 1913 USD QTY 1 = 2020 USD QTY 26.07, this means the USD has slowly lost its value from 1913 to 2020. 1970 USD QTY 1 = USD QTY 6.65 that is the USD value change in my lifetime, fifty years. Inflation makes your dollar worth more today than it will be in the future. ***amounts are close and cross-checked with various sources, exact amounts are difficult because of day to day fluctuations.
Did you ever look at the math? Consider the facts and think an institution as big as your own government was gaslighting you? to doubt that other countries have also gaslighted and manipulated their citizens as well.
Now I am starting to find a bit of cynicism in my own leeriness to cryptocurrency over the years as it’s transparent and has a lot more going for it than fiat money does. I suppose I should have taken this deep dive years ago. Sometimes there’s just not enough hours in the day, all things in due time I am glad I am finally coming around and taking this look now, I hope you are feeling the same way about your journey too! Now I can make better informed choices, education is power and you must seek to fully educate yourself for any system will only teach you what it wants you to know and seek to leave out unfavorable facts about itself that it deems threatening to its own survival. At least that seems to be my take away from government education considering what we really come away with about the financial system in this country. Which is really not much after a standard high school education.
Precious metals value was inherent in its scarcity but this is not true with paper money that can be printed on a whim. It’s not even as true with cryptocurrency as paper money which means it should be more trustworthy than paper if other good checks and balances can be put in place to help it establish a stable foundation. For instance, when a cryptocurrency is created it can be created with a cap on how much currency there will be, in limiting the overall amount of the currency, a scarcity model is created so value can be found it is not just printed on a whim. Its exchange rate is tied to how much it is valued by those using it and what it can be exchanged for to take bitcoin for example. It began where a dollar would get you several bitcoins, now you need several dollars to get a bitcoin. It’s value is favorable whereas the value of the dollar seems much less favorable if you take it in context of what we now know looking at the bigger picture.
Naysayers question its value saying you can’t spend it but that is simply not true. More and more places are accepting various forms of cryptocurrency as payment and there is more and more technology being developed to make it easy to flip currency into a person’s preferred currency for exchanging. Much of this is powered on the blockchain technology that powers cryptocurrencies, cryptotokens and other cryptoassets. Cryptoassets exist largely online and are not physical and tangible just as cryptomoney is a less physical and tangible form of money. Crypto assets can range from space (like land), computing power (like electricity), processing power (like labor) and so on. They have intrinsic value in a digital world, whereas fiat money still has no intrinsic value now that there is nothing backing it but the word of corrupt governments. Now what if you are looking for a reliable currency because your nation’s currency formerly the strongest in the world is on the verge of collapse? It’s not that you are looking to get rich but a stable currency to use for your day to day needs, then does your view of cryptocurrency change? Consider how much of what is done is already digital in the age of online banking, credit cards and payment apps.