by Zachary Lozevski
Have you ever begun to swipe your credit card and realize it has been hacked? Have you ever gone to the store and realized that your food costs more than usual? Cryptocurrency can solve many problems such as these associated with central banking and fiat currency.
In order to combat the COVID-19 crisis, the monetary supply of America has been greatly increased through various spending plans adopted by the government. The Consumer Price Index (CPI) demonstrates how the value of the dollar has significantly decreased since these plans went into effect and fears of inflation have come to many Americans’ attention. Inflation leads to increasing prices and the devaluation of the U.S. currency. Most cryptocurrencies, however, have a set number of tokens in which the value of cryptocurrency is determined by forces of supply and demand, rather than a central governing force. This is what gives Bitcoin its nickname, “digital gold.” In this way, cryptocurrency provides financial security and is not devalued by inflation.
Fiat currency, money that is not backed up by a commodity and is issued by a government, has its own issues. Fiat currency is usually routed through centralized banking systems that use one central server to host multiple accounts for your digital money. These banks are especially vulnerable to cyber attacks in which a massive number of credit cards can be hacked by an external threat. These cyber security attacks are nearly impossible in cryptocurrency networks that have enhanced protocol security measures such as SHA-256.
The digital asset market currently has a market cap of $1.6 trillion. This market has developed from the technology of cryptocurrency and includes intellectual properties such as NFTs (non-fungible tokens), digital art, and music, among others. Several Congressional representatives, including Cynthia Lummis (R-WY), are ardent defenders of the development of digital currencies and offer more favorable regulatory approaches to them. She sees cryptocurrency as an “alternative form of value” and a chance to “diversify the economy.” Cryptocurrencies have become a new financial asset class that may revolutionize not only money but all digital property.
In the history of money, value was usually represented through precious metals, such as gold or silver. However, in this new age of monetary policy, printing bill has become unsustainable and has led to global inflation. Fortunately, the rise of financial technology such as cryptocurrencies and digital assets could help prevent inflation from ruining the economy. The encrypted protocol of digital currency networks offers the world a chance to reinvent what money means and provide security and inflation-preventing scarcity. Embracing this technology will help address monetary threats while offering a versatility of real world applications such as digital art and NFTs. Digital currencies are an emerging market that provide encrypted security enabling that high tech world we live in.
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