How cryptocurrencies will change the international banking system and why you should care.
November 01, 2020
I am not telling you that you will make money one hundred percent sure. I am just telling you that this new paradigm could be just like the development of the internet in the 90’s, eventually changing the way we see banks and finance for a new generation of consumers, who are connected and reluctant toward institutions.
The cryptocurrency ecosystem was created in 2009, with Bitcoin, a new concept brought by an anonymous person, called Satoshi Nakamoto. At first, it was just a thing for the early adopters of new technologies. Some of them invested a relatively small amount of money and waited. The price of bitcoin at that time was roughly equivalent to 0. 001 USD. In 2011 some of them sold their coins for 0,30 USD. It sure means a lot; you earned a massive amount of money for a small investment at the beginning. At the time of writing this article, one bitcoin cost roughly 13,500.00 USD.
Most of the population does not care because the concept of blockchain and bitcoin is difficult to comprehend. And because of the financial crisis that hitted us every decade, few trust the financial system anymore.
I am not here today to explain the main factors and concepts that you should know to enter this world and to join what I assume to be the future of the global economy. I am here to trigger an interest in you, because you can be an early adopter too, like the nerds in 2009.
This is not a promotional article. Neither is it a series of guidelines to make you wealthy. It is just my opinion, and answers to some questions and fears that you may have on this topic.
The main point is trust.
How can we be sure that cryptocurrencies are not just a fad that will fade in the next decade?
The main points to answer this is to look to who invested in this system nowadays. First, giant companies like Google, Apple etc. But they could be wrong right ? Then why are global organization and states following their steps? Just like the US, China (one of the countries who invested the most in cryptocurrencies, when you know that their plan is to become the biggest economic power in the world, it could raise some questions), even the European central bank (confessing that they will set up a project to create a “crypto euro”).
How can we be sure that it is not a scam, with powerful traders behind it, awaiting to collect money from people like you, who know nothing about finance?
The principle of a cryptocurrency, is that nobody is behind it. Most of the time, when you exchange token (a virtual coin representing a cryptocurrency) it is the algorithm itself which confirms the exchange, with normal people who lend their computer’s computing power who accept or refuse the transaction. It is what we call De-Fi (stand for Decentralize Finance). Also, most cryptocurrencies, to prove that they have a solid base explain their projects behind the crypto eighty percent of the time, the currencies from these companies is a side project, aiming to raise funds, or to secure their transactions.
Are the cryptocurrencies linked with the “real world”? Or is it just too decentralize to be trusted for a long-term investment?
If you are living in France, you may know what a “Livret A” is. It is an account, provided by your bank where you can invest your small amount of spare cash. It will perform at 0.50 %. So, if you invest $1000, it will give a $5 profit. General inflation is above that. Even if you put all your money in this account, you will lose purchasing power. On the contrary, Bitcoin is seen as a refuge currency today. When the dollar and the euro lose value, when great uncertainties hit the global economy, bitcoin remains stable. Some cryptocurrencies are even backed by material things, like oil and gold. Some crypto, like USDTether, are backed by traditional currencies (in this case the USD).
My recommendation, like for the traditional market, is to put in this system small amounts (the $10 unused at the end of month) so if you lose it, it will be painless. But if it became fruitful, well done.
Thibault F.
Hi,
ReplyDeleteThis was a very interesting article. I understand how the crypto-currency can be interesting, but do you think we will be able to use it in our daily lives as random citizens ? Do you think that a small bakery will accept this kind of currency, knowing that even today, they barely accept credit card payment, so will people accept a new and non physical currency they can't touch, a currency they have to trust without any proof of its real value or existence ?
Thank you in advance
Yes I assume. Because those platefroms which sell cryptocurrencies and host stockmarket exchange tend to release credit card. Those credit cards work exactly likea regular one, excepted that they use your cryptocurrencies balance instead of your regular bank account and change it to FIAT currencies (euro-dollar-yen etc.) just before you pay. So for the local store, it will be the same as accepting the credit card.
ReplyDeleteHey Thibault !
ReplyDeleteGreat article. I have a question about crypto-currencies.
I think that crypto-currencies have a lot of advantages, but private blockchains like Bitcoin are a direct threat to the monetary system, and therefore states and central banks lose their monopoly of money.
We saw that in 2018 France began to want to take measures against these currencies which for them are a risk for the economy, while at the same time wanting to develop a system of permitted blockchains over which the European Central Bank would have authority.
Do you think that in the future the States will gradually try to block private blockchains like Bitcoin or let it fluctuate freely in parallel with their own blockchain managed by the central banks?
Thank you !
I do not know if the States will try to control blockchains, however it is the main principle of it to be completely independant from the financial system. I do not think that these central banks could regulate this system.
DeleteI regret that i do not have more information and advice to tell you,
Hope you'll be a future adopter,
T