How Cryptocurrency will Change the World
- May 3, 2021
- Posted by: Progress Ibrahim
- Category: Blockchain
What is fiat Currency?
A fiat currency in a simple term is the traditional money we use for day to day transactions. That is the USD, the GBP, the NGN etc. They are called the fiat money. They are the approved legal tenders by the government of every nation.
The fiat money functions as a means of exchange, they have the usual features of money such as scarcity, means of exchange and economic unit.
But, the fiat money origin can be traced back to the Gold Smith , several decades ago. One of the weaknesses of fiat is that it is under the control and manipulation of the government. This what we called centralisation
At this point, I want you to look at your Dollar, and tell me what you have been using it to do, and also the limitations it has. We move to the next revolution in the financial world.
It is the Fintech revolution.
The waves of financial revolution are currently in two forms ;
- Fintech 1.0 and
- Fintech 2.0
This is the beginning in the rise of financial technology, where payments and transactions are now digitized.
But, these digital technologies only innovate around fiat money, by digitizing them. This innovation helped to solve transactional payment, as payment became faster and more efficient. The leaders in this revolution are, Paypal (Peter Thiel, Elon Musk, Reid Hoffman etc), Interswitch, of recent we have Flutterwave, Paystack etc.
This industry began a financial disruption revolution. They started by helping to digitize most of the financial services such as transfer, loan , payments, name them.
This created a good foundation for Fintech 2.0…
The rise of cryptocurrency. What is a cryptocurrency?
Crytocurrency innovation or invention adds many layers to what the fintech 1.0 started. I will explain the layers with these points
Crytocurrency is a digital currency that exists only in virtual form or online form. We have examples such as Bitcoin, Ethereum, Litecoin, Dodge, Ripple etc.
These digital currecncies are built on a digital ledger technology called Blockchain. Blockchain is a technology that makes digital record keeping systems to be public, and makes transactions recorded on it difficult to erase. Blockchain provides a record taking technology that makes it possible for everything happening on the network to be recorded as they are taking place, and once it is recorded it cant be deleted. So, this makes everything that goes on on the network to be traceable. Blockchain actually is the technology that helps to decentralized cryptocurrencies.
Crytocurrencies help to solve one of the weaknesses of fiat money which is centralisation, by decentralising the control. This means, crypto is not controlled by central banks and any central authority or system. It is maintained by a computer connected to the network from different locations. They are control by what we called Nodes (Computer powerhouses)
Tokenization layer is the conversation of money into digital coins. we have them as digital coins, that is why you see their symbols as coins. I am of the school of thought that sees crytocurrencies to have two functions;
- As a measure of value: This makes crypto to act as money that can be used to pay for goods and services.
- As a store of value: This makes crypto to act in the asset class. It is a form of investment that can grow. You saw how bitcoin (BTC) grew from $15, 000to $50,000. The main feature of assets is that they grow in value.
Generally, blockchain makes cryptocurrency have the following value and functions.
Every transaction that takes place is known by everyone
Nobody controls the network, it is controlled by nodes
- Security :
You have your money store in your personal banks (Wallet) etc.