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"Chancellor on brink of second bailout for banks”" this message was written in the first block of bitcoin. It translates as: "The Chancellor is on the verge of a second bank bailout”" This is the headline of an article in The Times about the consequences of the 2008 economic crisis.
The creator of bitcoin did not explain this message in any way, but the crypto community perceives it as an attempt to replace the standard financing system with bitcoin.
Let's look at how the blockchain has changed the financial system since its inception and whether the cryptocurrency can completely replace the usual money.
Cryptocurrency is transparent transactions
Blockchain is a large distributed registry that has many copies. Each user can see the contents of this registry, and to make changes, you need confirmation from other users. Therefore, one of the main advantages of cryptocurrency is the transparency of transactions. Any user can see the wallets between which the transaction was carried out and the amount transferred.
Ideally, this feature of the blockchain should completely eradicate corruption and other illegal money transactions. Blockchain transparency is used not only in the financial sphere. This can be used in the field of copyright, real estate and others.
Financial equality
To use fiat, you need to have access to a bank. To use cryptocurrency, you need a smartphone or a computer. Some countries in Africa and South Asia still have problems with access to banks. Whereas they can trade cryptocurrency with almost no problems. So digital assets equalize all participants in the financial system and make it possible to store and use financial resources even where there is no access to banks.
Reliability and security of payments
Paper money and checks can be forged, and electronic payments can be canceled. This increases the risk of fraud with fiat money. Cryptocurrency transactions are irreversible, this protects against some types of fraud.
Limited issue and volatility
If we talk about bitcoin, the maximum number of coins is 21 million. This protects the cryptocurrency from inflation. At the same time, coin mining becomes more complicated, and the reward for it decreases. All this leads to a smooth increase in the price of bitcoin. This is a plus for those who want to make money on investments in the coin. But a minus for those who plan to use cryptocurrency as a means of payment. Do not forget that bitcoin is volatile and its rate can change dramatically. The volatility of bitcoin and other cryptocurrencies complicates the payment of goods and services. Stablycoins help to correct this. For example, Tether, backed by US dollars.
Cryptocurrency and the Law
In early June 2021, El Salvador (Central America) legalized cryptocurrency. This is the first country where bitcoin is an official means of payment on a par with the national currency.
The legalization and regulation of cryptocurrencies are being discussed in many states. For example, Belarus legalized cryptocurrency back in 2017. In Ukraine, they have been talking about the legalization of digital coins since 2018. In Russia, the “Law on Digital Assets" was released in 2021. Other countries are also actively considering the regulation and legalization of cryptocurrencies.
To summarize: will the cryptocurrency replace fiat
It is difficult to answer this question correctly, because the regulation of cryptocurrencies at the state level is just beginning. We can only say unequivocally that the financial sector is waiting for changes, and in order for cryptocurrencies to become a familiar means of payment, states must participate in the development and research of technology.
