• Ganesh

Will Bitcoin replace cash in the future?

In short, that won't happen. This walth post is going to be the long answer to the question.

Bitcoin and cash

Why Crypto?

Cryptocurrencies, as the name, says it is a currency just like the currency which you have in your wallet but in a digital form. The cash in your wallet say Rupees are printed by Central Banks(RBI) of the country and controlled and regulated by them. Central banks can print as much cash they want and that's a bad thing and it causes inflation in the long run and can decrease the value of the Rupees. So, the value of Rupees decreases over time, this is the same for other fiat currencies out there.

Fiat currency i.e currencies issued by the government like Rupees, Dollars, and Euro.

The other problem with Fiat currency is you can make transactions only in your country.

So this is why Cryptocurrencies such as bitcoin are invented, they are decentralized i.e, not controlled by any government and since they use blockchain tech, transactions are more secure, you can make transactions with any person on the earth who accepts cryptocurrency.

That's not the case with fiat currencies, you have to go through paperwork and huge service charges.

So, as you learn the original purpose of Cryptocurrencies, you feel that they have a lot of pros than our fiat currencies but still, Cryptocurrencies may not replace them here is why.

No Real Value

Gold has value because it is physical and you can see it, Stocks have value because they are a part of the ownership of the company, your Rupees have value because it is backed by RBI, or else it would simply be a piece of paper.

Cryptos are considered valuable just because people who own them assume it is valuable. But does not even have a physical form. But the tech behind it " The blockchain" great.

Not Stable.

We all know how unstable Bitcoin and other cryptocurrencies are. someone can become a millionaire or lose a million if the person owns bitcoin. It would be really hard to set prices if bitcoin becomes a mainstream currency.

Considered as an Asset.

Bitcoin and other cryptos are considered as a digital assets rather than currency. In the early day of Bitcoin, it was actually used for transactions in few cafes and that was its original purpose. As the price of bitcoin started increasing it moved away from its purpose and people started considering it as an asset. Will you use Gold instead of money to make transactions in your local cafe? No right! because it is gold and it is valuable. But in ancient India, gold coins were used as money to make transactions instead of nickel and aluminum coins as the present coins are made up of. So, when people realized that gold is valuable and it less in quantity, it is considered as an asset, and people started storing it, more and more people started storing gold, its price kept increasing. The same is happening with bitcoin and that's why people call it Gold 2.0

Banking is not possible.

Banking activities such as lending via bank would not be possible if bitcoin is used as currency, because it is not stable. For example, a bank lends you 1 bitcoin at $20,000 as a loan and you agree to repay it after 1 year. So, after one year price of 1 bitcoin hits $40,000

now, you must pay twice the amount you borrowed and that's a nightmarish situation.

The government and Central bank(RBI) will have no control

Since bitcoin is decentralized it can't be controlled by any government or central banks. It would be incredibly difficult for them to implement the monetary policies or control the cash flow in the economy and there are only 21 million bitcoins no government can create more bitcoins out of thin air.

So, will cryptocurrencies will be forgotten or just used for trading in the future because of the above reasons? Well Not really!

Stablecoins: future of cryptocurrencies

Stable coins are just like bitcoin and other cryptocurrencies but their value is linked to the fiat currency. For example, there is a Tether stable coin unlike other cryptos its value is the value of USD it's like if you own a one Tether stable coin you are actually owning 1$.

If there is INR stablecoin one INR stablecoin value will be equal to 1 rupee.

Governments all around the world are focusing on building a central bank digital currency (CBDCs) i.e, stable coin of their own currency. China has already introduced its digital yuan, china's own stablecoin, and the Reserve Bank of India is planing its stablecoin.

If each country has its own blockchain-based stable coin voila! the whole is problem solved.

Say if you are a business based in India and your client is in the US and you both must approach middle man such as banks to make transactions, they are going to cost you a lot of services charges and it would take time for the transaction to happen. That's why cryptos were invented but it's not reliable because you know the reasons.

So, stablecoins solve the problem. You buy USD stablecoins using your rupees and send them or the other way can also happen, few minutes and the transaction is done.

That's why stablecoins are the future and the other cryptos will be used for trading and bitcoin and ethereum will be considered as digital assets because people trust them more, all other coins are shit coins, They will never be used as a mainstream currency.

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