Crypto currencies gaining ground

Will cryptos still be used? Will it still be a currency? Some serious questions are arising based on the ‘crypto winter’ we just had.

The traditional crypto is a highly volatile ‘currency’ that represents investor sentiments, trust and the strength of the balance sheet of the issuer. In essence: do they have money if you should decide to cash it.

It leads into one thing: is there a need for another currency? If we can pay in dollars and pounds and euros, why do we need something else?

According to Sofu, there are advantages of a digital currency, like:

• Ease of transaction: it really only requires a cellphone app. And (overseas) you can go to the crypto ATM and deposit money into your crypto wallet. no borders either

• Fast: transactions are within seconds, not 3-5 banking days.

• Inflation-prone: sort of. If a currency is not linked to a national currency, the risk of artificial exchange levels are minimal

• Transactional freedom: transactions are independent of third-party interventions. Banks can close you off, countries can have regulations on possessing their currency, exchange regulations can prohibit free exchange. A crypto transaction is like handing a bank note to a friend in the street!

• Always available! No banking hours.

So, what if we can have a crypto without the speculative aspect? One that is stable and not prone to the FTX scandals?

In comes stablecoin!

A ‘normal’ currency is backed by the economy of a country as it is issued by the reserve bank. That means that the value is linked to a country’s economic performance. Typically, it cannot go totally pear-shaped unless the country simply fails. Some do, but it is not the norm.

So, if a crypto can have the same backing as a typical currency, we are past the speculative element? In essence, yes. And those are stablecoins.

A stablecoin is therefore pegged to the asset of something very large, like the US dollar, the Euro or something. In essence to an entire country’s economy.

Cashing in on your stablecoins, backed by the UK reserve bank, can hardly make a dent in its ability to pay, even if you are super rich! THAT is the advantage of offering a stable currency without major ups and downs.

This is the single thing that can make it a success and ensure general usage. It is a daily-day thing, not speculative.