You have probably heard it said that digital currencies are complex, difficult to understand, and ambiguous in nature. This view is technically quite understandable, yet the fact that digital currencies, which are a substitute or complement to Fiat currencies, are only slightly more complex, less difficult to understand, and not ambiguous in nature, is still being ignored.
to the Report Crypto News, of course, everyone knows how to spend their dollars or euros, but few people know what system the money that people keep in their pockets is run on. A simple example of this is a survey conducted in the UK in 2014, which found that only 10% of members of the British Parliament, who are considered eligible for legislation, know that most of the money in the UK when lending by credit Commercial banks are offered. The poll showed that 71% of members of the British Parliament thought that only the government or the central bank was allowed to print new money.
This shows that understanding digital currencies is not as difficult as it sounds, compared to Fiat’s monetary system, at least economically. According to many experts, Fiat currencies and digital currencies should be compared in another way. Fiat currencies have no more fundamental value than bitcoin and other digital currencies, and the value of both depends equally on the level of demand and consumer confidence.
Different forms of complexity
No doubt you have been involved in discussions about the complexity of bitcoins and digital currencies. Even seemingly sympathetic figures such as Mark Cuban and John McAfee, who have entered the field in recent years, have said that the over-complexity of digital currencies could prevent their widespread acceptance.
However, most proponents of this theory confuse two different issues with Bitcoin and other digital currencies. They look at the technical complexities, such as the cryptographic methods and blockchain structure of digital currencies, and conclude that this complexity extends to the macroeconomics of digital currencies as well.
Hanna Halaburda, an associate professor of technology, operations and statistics at New York University School of Business, said:
The complexity of digital currencies and Fiat currencies are different. Using cash, at least in its current form, is easy, because you can see what your assets and what you are spending.
In contrast, digital currencies are largely transparent about monetary policy and the issuance of new units [به صورت مستقیم انجام میشود]. However, using them is a complex task. You need to remember the password of your wallet, if you enter the recipient’s address incorrectly you may lose your money and there is no one you can contact to fix this problem.
Understanding the Bitcoin monetary system is very simple. With the extraction of each new block, some bitcoins are issued. Block rewards are reduced every four years during the Howing Periods to eventually extract the 21 million units that are intended to be the total bitcoin supply. On the other hand, the monetary system of the United States and other countries of the world is not only constantly changing, but is also composed of various complex layers.
In addition, many activists believe that the apparent complexity of the experience and user interface of digital currency platforms will diminish over time.
Lou Kerner, a shareholder in Blockchain Coinvestors and chief digital currency analyst at Quantum Economics, said:
Just as the evolution of technology has made the use of the Internet so easy that it has become the mainstream, so is digital currency technology evolving and on the way to being accepted as the mainstream.
Corner says the openness and immutability of China’s blockchain technology has made digital currencies extremely transparent, so much so that we know exactly how many bitcoins have been mined so far.
[این در حالی است که] No one knows how many banknotes were printed just yesterday!
Philip Gradwell, chief economist at Chainalysis, agreed with Corner, saying:
It is a common misconception that digital currencies are not transparent. Actually [تمامی اطلاعات] They are registered in the General Office of the Blockchain and this is one of the most transparent methods of transferring value. In the first place, it is the transparency of digital currencies that has led to the emergence of research companies such as Chinalis.
It should also be noted that if something is difficult to understand, at least technically, it does not mean that people can not or do not want to use it.
“Paul Paul Koning, an economist, said:
It is very difficult to understand the traditional monetary system. Most people have no idea how to work [این سیستم] Do not have. But you do not need to know how it works to drive a car, and the same goes for dollars, yen and pounds.
Another criticism of digital currencies is their lack of fundamental value. That may be true, but the same is true of Fiat currencies.
Hannah Halaborda said:
Fiat currencies do not in themselves have any fundamental value. They [در واقع] They are supported by the policies of the exporting government, and this has been an effective strategy on many Fiat currencies.
Halaborda says Fiat currencies are considered a fundamental asset because they can only be used to pay taxes and therefore will always be in demand, or at least during tax periods.
Associate Professor of New York University added:
Aside from that, Fiat currencies are valuable only because some people think that in the near future others will [این ارزها] They will value.
Halaborda has called bitcoin “the new generation of Fiat currencies,” but he still disagrees with those who say the digital currency has no intrinsic value.
Bitcoin and other digital currencies offer services that did not exist before; [مانند] Online semi-anonymous transactions. I think this is the core value of bitcoin.
Also read: Why is bitcoin worth it?
Lou Kerner says that digital currencies have at least more fundamental value than Fiat currencies. However, he believes that both of these assets have no intrinsic value.
He said in this regard:
The value of Fiat and Bitcoin currencies, [هر دو] It is determined by the amount of supply and demand and there is no support.
In the case of Fiat currencies, the lack of core value causes at least some of them to lose value over time.
[دولتها] They export more Fiat currencies until people come to the conclusion that [آنها] They are no longer valuable. [اما] Bitcoin solves this problem.
Domenico Lombardia, director of global economics at the International Center for Management Innovation in Canada, believes that Fiat currencies have no intrinsic value because their position depends entirely on people’s trust in the central bank or the issuing government.
Different central banks offer different levels of trust [برای مردم] they prepare. In all systems, the central bank has the highest position. The rule of law and the organizational framework under which the central bank operates are designed to the strictest standards.
Lombardy believes that in order for digital currencies to be able to compete with Fiat currencies, they must gain the trust of ordinary users by designing a framework.
This would not be possible without legislation and oversight.
But not all digital currency activists agree that fiat currencies have no fundamental value. John Paul Canning says central banks usually buy assets before issuing new money.
The economist said:
[بانک مرکزی] It can use these assets to repurchase any of the currencies it has issued, thereby enhancing the value of money. If additional assistance is needed, the central bank can ask the government to increase the treasury balance. [بخشی از] tax income [کشور] Provide them.
Of course, this only covers the monetary base. The Bank of England announced in 2014 that bank deposits make up 97% of the country’s monetary cycle. This shows that bank deposits are mostly created in the form of loans and by commercial banks themselves, so it can be said that the only thing that supports this money is the obligation to repay the debt.
Monetary base includes commercial bank deposits with the central bank, cash in circulation in the hands of the public, and money that is physically held in banks. The monetary base is actually part of the total money supply of a country that has the highest liquidity potential.
User interface of digital currency platforms
Few people in the UK know that most of the country’s money is supplied by commercial banks. It should be well understood that the monetary system of Fiat currencies is at least as misleading and opaque as digital currencies.
It is true that digital currencies are technically complex, but the backend structure of bank ATMs and the bank’s mobile applications is similar. This complexity does not prevent us from using Fiat currencies. In the case of digital currencies, this structural complexity will not prevent them from being used, at least as the platforms’ user interface becomes simpler.