There’s a lot of discussion going around about the issues, consensus mechanisms, and technical applications within cryptocurrencies.. But on top of all these question marks is a huge question mark that perhaps envelops cryptocurrencies: “are cryptocurrencies real money?”
Much of arguments, both agree and disagree, that cryptocurrency is the true form of modern money there is. The views of those who participated and those who disagreed will enable us to answer the question “Do I believe cryptocurrencies are real money?”
Let’s Clarify the First Question
Before discussing whether crypto money is real money, it is necessary to define what “money” is.
What is Money?
Money is any generally accepted item or verifiable record that can be used to pay for goods, services, and repay debts in a particular country or socio-economic context. provided. Thanks to the invention of money, the barter system was left behind and a fast-moving, cross-border trading system emerged.. This contribution of money to the development of human civilization is not noticed by many.
It must be admitted that many people do not know the value of money.. The origin, purpose and characteristics of the coin are unknown.. In this period when money is unknown, people spend the money they are familiar with in their daily lives.. But they don’t know that there are quite a few types of digital currency currently used as global currencies.. We can also call it crypto money.
People don’t know what crypto money is, just as they don’t know what money is in their pockets.. Therefore, the most important feature of crypto money goes unnoticed: decentralization.. Because there are no stockbrokers, clearinghouses, geopolitical requirements and restrictions imposed by the government of each country, and the all-powerful World Banking System, who are involved in crypto money.
Money has a personal meaning for all of us.. For some, money is a productive way to have or experience things we want.
Others use money to avoid something they don’t like or simply to save time.. After all, time is money.
Still, people spend money on power, safety, security, love, friendship, love;
The psychosocial impact of money on both macro-level groups of people and individuals at the personal level is a broad and fascinating subject.
However, we should stay focused and talk about whether cryptocurrencies are real money.
Many people used to think that money was just nice coins that made me buy things, or pieces of paper with cool designs.. The first money I spent was from the United States. Later, while visiting another country, I realized that – like stamps on the letter – many different countries use their own coins and paper money in local trade.
This is East Timor, which, with a few exceptions, still accepts US dollars. It meant I couldn’t continue to use my own money in other countries – like Ecuador and Micronesia.. So I had to convert my useless money into local, disposable money.
Of course, this conversion is not free.. You have to pay a certain “conversion fee” and therefore the money you receive is worth less than the money received by local workers in your country.. Simply, if you are a citizen of that foreign country and have a job, you do not have to convert the money you receive and pay a conversion fee.
However, things can get even more costly.. When you want to convert the foreign money that you did not spend before or after returning to your country, your own country’s currency, the money you have at first melts away.. But what else can you do while you’re abroad temporarily?
In saying that, each intermediary somehow gets its share.
More and more people are stopping carrying coins or banknotes.. People pay for products in stores, online purchases, accounts in restaurants with a debit or credit card. But they still know that when paying this way, they are actually spending the money in their bank account or borrowing money from a credit card company.. In addition, people restrict the money they spend or keep in their accounts to their own country’s currency.
The use of electronic payment systems has made it much easier to purchase products and services in foreign countries.. Eliminated the need to convert money. But don’t forget one thing. You pay extra for using your debit or credit card in a foreign country.. The bank or credit card company charges you a “foreign currency fee” or “international fee.”
The Criterion of Money
Barley grains, spices, jewelry, livestock, ancient Mesopotamian clay tablets, Seashells of pre-colonial island nations, precious metal coins from the Roman Empire or today’s paper money… Every form of money has to meet certain criteria.
The first five criteria of money are objective and accepted by almost everyone.. The last two criteria are quite subjective and are the reason for the debate between the traditional and progressive thinkers of the economy.
The five criteria that will be mentioned are quite easy to understand.. In fact, the criteria almost speak for themselves.
Shopping Tool
The number one use of money is as a shopping tool.. Money provided a solution to the problem of comparing two dissimilar products.. In the barter system, traders had to ponder how many chickens were needed for a goat or cow, how many loaves of bread were needed for a bottle of wine, or how many kilograms of grain were needed for a blacksmith’s anvil.
It also solved another problem with the money barter system: “matching of demands”
Before money, people had to deal with finding people who would want what they had. This made it difficult for many traders.. It is not very common and unproductive for you to want or need what the other person has, and the other person to want or need what you want.
If you want someone who wants what you have. If you can’t find it, you’re offended by your luck.. And in desperation you have to resort to less profitable brokerage trades to eventually get what you need.
Portability
Money must be portable. With the invention of money, people could bring light, highly portable money and use it for shopping instead of actually bringing animals to the market area.. This criterion is really not difficult to understand. Can you imagine carrying a cow or a sack of wheat with you to the grocery store? Or rather, can you imagine without laughing?
Unit of Account
The term “unit of account” means that one unit of measure has the same value as another unit of the same measure in the environment in which money functions.. One Turkish Lira is worth the same as another Turkish Lira.. Such standardization of units is absolutely vital to a highly computationally efficient and effective trade.
This is why the US Secret Service spends so much time and manpower fighting the world’s rogue organizations.. In March 2015, the U.S. Secret Service estimated that 0.25% of the $3.4 billion – $1.36 trillion circulating in the world was counterfeit.
Missing counterfeit money is nothing new.. Counterfeiting dates back to at least the 1700s in England and was considered a great treason at the time.. A counterfeiter named Catherine Murphy was executed for this crime in 1798.. Catherine Murphy was executed by hanging, and believe it or not it was a lucky death for her.. Because a few years before his execution, the death penalty at the stake was abolished by the 1790 Treason Act.. Counterfeit British coin found in Alpine Lake near Austria shows Nazis minting counterfeit British currency during WWII. Edward Mueller, who lived in New York in the late 1930s, spent more than 10 years of his fake money all over the city.. He was later caught by the Secret Service.. This was also filmed: Mister 880.
Itzhak Loz and Ronen Fakiro, who minted more than $86 million in counterfeit money in 2015 by making “almost perfect $100 bills”, were also caught by the US Secret Service.
While the unit of account criterion of money is so important to fair trade and posing such a great threat to the financial system, the fight against counterfeiting is very serious.
Sturdiness
The ability of any form of money to endure the rigors of ordinary shopping need. Changing hands over and over from one person to another, being carried in bags, pockets, treasure chests, etc.. If the money used cannot withstand them, it is not used.. One of the charms of the coins was that they were quite sturdy.
But at the same time, desperate things are done in desperate times.. Sometimes the robustness criterion of money was ignored.
In post-World War II Germany, the government wanted to increase the money supply so much that after a while, the paper used to print money ran out.. Perishable, toilet-paper-thin papers and scraps were used to print money. Today, banknotes are made of paper and fabric to be more durable.
Exchangeability
An item of the same nature must be completely interchangeable with another similar item.. In other words, in a place where Turkish Lira is used, a ₺ should be able to be exchanged for another ₺ without any profit or loss.. While the unit of account is related to the unit measure and equality of value, exchangeability is related to the ability to replace one thing for another.. If a currency is outside its functional environment, such as in a country where it is not accepted for trade, that currency is not exchangeable.. Even if the unit of account criterion is met. The only way to make that currency exchangeable is to convert it to a third currency that is accepted by all parties.. Thus, the third currency becomes the unit of account, while the other two currencies become semi-exchangeable.
This is how the Medici family of Renaissance Italy made their fortune from the currency exchange.. They found a deficit in the law of interest.. This act was considered a great sin by the Catholic Church.. In fact, Dante, in the Inferno, the seventh layer of Hell is reserved for interest-bearers.
The only people allowed to charge interest on debts were the Jews.. And only for the loans they gave to Christians.. Why?
Because in the fifth book of the ten Commandments they used a “evasion”. The part “you may charge interest on a stranger but not on a brother” in Chapter 23:20 means that Jews can charge interest on non-Jews but cannot charge interest on another Jew (brother). The Medici family came and formed what we know today as FOREX.. What was known as “interest” was disguised as “commission” and “precautionary”. The Medici family thus became a legitimate business and with it gained incredible wealth and power.. Many Medici became nobles and popes. Some historians believe that the Medici family mostly financed the Renaissance.
Core Value
The “core value” in finance is without considering the market value of a company, stock, currency or product. This criterion is among the subjective ones, and there are various financial formulas and economic theories on this criterion, and these are never universally accepted.. These ideas can be understood in many different ways.
Gold and silver investors do not accept anything other than gold and silver as money.. These people think that all currencies in existence are actually substitutes for something that has real value—gold and silver.
These people also quote Article 1 of section 10 of the Constitution: “No state He will do nothing but gold and silver as intermediaries for the payment of debts.” Even Louisiana, Texas and Utah have passed laws to use gold and silver as money, and many states are in the process of making similar arrangements.
Some do not support this argument and say that the definition of money is not provided in the Constitution.. These people also say that what is mentioned in chapter 10, clause 1, is that the original states were prevented from creating a currency as a legal tender.. In addition, the Coinage Act of 1792 made it legal to mint copper, gold, and silver coins.. In other words, Congress legally recognizes money made of any material other than gold and silver.
From post-revolutionary America to the present day, US money has either been minted in gold or silver or backed by gold or silver.
The Americans were assured that their currency was backed by gold or silver at every bank. However, over the years, the amount of gold behind each dollar decreased and the situation worsened with the 1944 Bretton Woods Agreement.. In this deal, the dollar was backed by only one piece of gold compared to the original US dollar, and currencies in the rest of the world were pegged to the dollar.. With this agreement, a brand new monetary system was established.
In 1971, when the dollar was declining, the value of gold was rising and the countries wanted their US dollars to be replaced with gold, President Nixon completely removed the dollar from the gold standard.. Suddenly every other country did the same.
The new currency that emerged was also “fiat”. That is, a currency backed by the authority, with a seal of approval (nominal), not gold.. Of course, after this situation, many people were against fiat money, and they were probably the people who adopted cryptocurrencies first.
Each fiat currency had a beginning, middle, and end. Put another way, no human-created fiat currency has ever enjoyed immortality.. All of them have had a period of adoption, popularity, decline, and eventual death.
Let’s get back to the core issue of value.
If you believe a currency should be backed by something of value, it’s likely no currency at all. you don’t believe that the currency is real money.
If you believe that value is perceptual, then any and any currency is real money.. Especially when backed by a country’s military might.
Pragmatists use market cap and popularity to measure the fundamental value of a currency.
Value Custody
The final criterion for this currency And that is a subjective matter.
The store of value means that a currency can retain its value for a long time.. No doubt gold tops this list. Since ancient times, gold has retained its value as a form of money.. No fiat currency has ever reached this record.
Compare this record with the US dollar as a store of value. Discussed at a secret meeting on Jeckyll Island and subsequently signed by President Woodrow Wilson, the purchasing power of the US dollar has dropped more than 96% since the creation of the Federal Reserve on December 23, 1913.
Ask now. which “what is meant by long time”. So six years is quite a long time for a hummingbird with a lifespan of 3-5 years.. This question raises another question.. “Who decides what a long time is?” As much as gold functions as a store of value? So more than 5,000 years?
Or a few decades, like Germany’s store of value period? The period that ended with the Second World War and the post-war Germans hauling carts full of money to the market just to buy a loaf of bread or a bottle of milk. What’s the point of measuring a store of value when there is?
Nothing but gold and silver has an undisputed, reliable history as a store of value. Many people would be extremely pleased if their savings remained, or even increased, in value for at least three future generations of their family.
Worth Mention
Not much before we dive into whether cryptocurrencies are real money or not. It’s worth mentioning something that many believe should be among their criteria for money: scarcity.
To simplify, the less a resource or asset, the more valuable it is.. While things like precious metals are inherently scarce, they are not inflationable currencies.
Many cryptocurrencies are not inflationary.. Because there is a certain supply in the algorithm of these cryptocurrencies, and the time intervals in which the release to the market will increase are certain.
Is crypto money “real money”?
Now we will compare crypto money with fiat money in the context of the criteria of money.
Shopping Tool
Cryptocurrency is the same as fiat money as a shopping tool. You can use both to buy the same things. It may even be easier to buy some things with cryptocurrencies, as Silk Road’s closure and other online deep-web shops have shown us.
Portability
Portability as long as there is no power cut anywhere in the world. prize goes to crypto. Even a massive, global EMP might not affect you if you’re in a modernized cold war bunker.
With the scan of a QR code, the tap of a smartphone app, the click of a web wallet, cryptocurrencies can be sent and received quickly and easily.. You need an intermediary to make the same transaction with fiat money. You pay transaction fees when making cryptocurrency transactions, yes, but these fees are overshadowed by the transaction fees charged by banks or electronic transfers.
You don’t have to deal with size or weight when transferring cryptocurrencies.. Paper money does not have this luxury. Carrying large amounts of paper money from one place to another is very laborious and dangerous.. Especially if you’re doing an undeclared, illegal transaction, you’re breaking the law.
Account Unit
Account unit reward goes to cryptocurrency. One unit of cryptocurrency always has the same value as another unit of the same size of the same cryptocurrency.
Cannot Be Counterfeited
Another name given to counterfeiting in the digital world is “double spent”. Using the same money twice means forging both transactions. One of the reasons for the emergence of cryptocurrencies was to oppose this “double-spent” problem.. This is achieved through Blockchain technology and various consensus mechanisms embedded in crypto money algorithms.
These features put crypto money one step ahead of fiat money in terms of unit of account.
Sturdiness
Cryptocurrency exists online and is not a physical object. So it’s physically impossible. We add one more point to the crypto money that wins in the robustness category.
Sturdiness Doesn’t Mean Loss
Many newcomers to the cryptocurrency industry have lost their “keys”, that is, the alphanumeric passports that allow them to access their cryptocurrencies.
Fortunately, many modern cryptocurrency wallets have backup and recovery mechanisms.. However, just like a physical wallet, security in these wallets is entirely the responsibility of the wallet owner.
Cryptocurrencies cannot be withdrawn
If someone sends cryptocurrency to the wrong person or place -wallet address- and receives it back if he wants, he can’t. In other words, once you hit that “Send” button, you can’t hit “Undo”.
On the other hand, business owners who accept crypto money do not have to pay for credit card services or deal with suspicious charges.
Exchangeability
Cryptocurrencies have no exchangeability issues. Unlike fiat currencies, cryptocurrencies are not geopolitical in nature.. So the functional environment of cryptocurrencies is everywhere.
This does not mean that there are no places that do not accept cryptocurrencies.. There is. But put this side by side with the number of countries that only accept their home country’s fiat currency and still accept cryptocurrencies. I think cryptocurrencies fall under this category. you won’t believe it’s real money. However, if you believe that the underlying value is an individual interpretation, every currency is likely to be real money.
If you only care about making your daily, real-life transactions quickly, or if you only care about the market value, then the most suitable and popular currency is your core value.
Storage Tool
Only things like gold can truly be a store of value if you’re a historian or plan to live forever. However, if you are an ordinary mortal, you can choose a temporary period of time for a currency to be considered valid and decide whether that currency will survive longer than your expiration date.
Source: Is Cryptocurrency Real Money? Brief Discussion on Major Issues Surrounding Debate by JaiChai
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