10. Crypto-Currency vs Traditional Banking

The evolution of money during our lifetime has been stable up until the introduction of digital currencies with Bitcoin in 2008. Whether withholding money is in the form of precious metals, bank notes, paper bills, or digitally, there must be a general agreement of value for a form of payment to be acceptable.

•   Non-consumable — cannot be consumed for purposes other than an exchange of value.

•   Portable — can be easily carried around.

•   Divisible — can be turned into smaller pieces for certain uses like paying a specific amount or micro-payments.

•   Durable — does not wear away or depreciate through time or in certain conditions.

•   Secure — cannot be counterfeited.

•   Easily transferable.

•   Scarce — cannot be replicated without end.

•   Fungible — each piece has the same value as its equivalent.

•   Recognizable — it is recognized and accepted as a means of transaction

The main difference between Bitcoin and traditional banking systems is the decentralization and peer-to-peer functionality of the currency which provides the currency holder full control over their asset. It relies on the combined computing power of the network participants bypassing all centralized intermediaries, in this case banks. Not only does no one have influence over your money and transactions you send or receive, but the transactional cost is also significantly lowered.  In contrast, fiat currencies rely on centralized entities like central banks, commercial banks, governments, payment processors like VISA/MASTERCARD and other intermediaries. Any of those organizations have an authority to decide whether to approve your transaction, whether you can send money to certain people or organizations, or if the money you’re using is legal or not.

The digital revolution did not spare the financial world, as the blockchain technology introduced a new modern way of holding currency. The possibility of a digital currency, or coin/token, solved the consumers’ need for more financial transparency, lower transactional costs, faster transactional processing time, and more importantly to bypass inflation. The first cryptocurrency to see light of day was Bitcoin in 2008, followed by another handful of other cryptocurrencies by 2010. Although new digital currencies entered the market at that time, and their prices rose and fell; the volatility, novelty, and lack of government regulation associated with them slowed down their popularity and democratization. As history shows, the undeniable advantages this technology offered eventually prevailed and allowed it to mature quickly from the ground up, from just a handful of digital coins in 2013 to reportedly 10,000 as of 2022. 

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