CRYPTO VS CASH

“Better late than never”

The idea of encrypted electronic money was introduced in the year 1983.
40 years later, I sit in front of my computer, reluctantly, researching about
it for the first time.
I begin to look for clues that explained this concept to me. Reading
articles from renowned websites and entering the phrase “what is
cryptocurrency” more often than I ever had. Majority of the google pages
had turned from having blue to purple links. But by the end of it all, the
world of “crypto” seemed a little lest baffling and a lot less boring than it
had initially.
The history of cryptocurrency.
Who Introduced the Idea of Digital Currency?
In 1983 American computer scientist David Schaum introduced the idea of
encrypted electronic money (e-cash). He eventually rolled out an early
form of digital currency called DigiCash, but had to file for bankruptcy in
1998, a year after turning down Microsofts offer to buy the company for
$180 million.
In 1998, fintech start-up Paypal launched a web-based payment platform
via email, leveraging Schaum’s electronic money concept.
In October 2008, pseudonymous software developer Satoshi Nakamoto
turned the heads of bankers with his monumental introduction to worlds
first cryptocurrency, Bitcoin. In his legendary whitepaper, “Bitcoin: A Peer-
to-Peer: Electronic Cash System,” Nakamoto introduces crypto as “an
electronic payment system based on cryptographic proof instead of trust.”
Cryptocurrency continued to spark global interest, and by 2013, Bitcoin
had more than 11 million coins in circulation.
The cryptocurrency industry continued to surge throughout 2016, but in
2017 the world really took notice. Bitcoin’s price skyrocketed, reaching
nearly $20,000. Ethereum also exploded – starting the year at $8 and
finishing above $755 – a more than 9,000% return on investment. In
December 2017, the search terms Bitcoin and Ethereum both reached all-
time highs on Google Trends.
What is cryptocurrency?

Cryptocurrency is a combination of two words: cryptography and

currency. The word currency means a medium of exchange and money in
circulation and the word cryptography is the encoding and decoding of
information across communication systems and computer networks.

Cryptocurrencies, are digital assets often with no physical form. They are
entirely decentralized meaning they are not printed or minted by
government entities or central banks. Most are digitally created (mined)
and managed by a network of computers. In this decentralized model
cryptocurrencies such as Bitcoin and Ethereum are operated by peer-to-
peer computing networks and powered by the blockchain, a new kind of
distributed database. The blockchain enables all peers, sometimes called
network participants, to approve and verify crypto coin transactions
independently, without the need for a trusted intermediary.
Several cryptocurrencies run on the blockchain and are maintained by
network participants. Most blockchains use advanced cryptography, to
provide cryptocurrency’s privacy and security.

For example, one cryptographic tool called a secure hashing algorithm

computes unique codes, called hashes, for each transaction. Because all
transactions on a blockchain are grouped into blocks, encoded as hashes,
and linked together with sophisticated math, it’s very difficult to go back
and alter any records.

what could be economic reasons to make way for this medium / financial
exchange.
At the beginning of 2020, the world saw a cryptocurrency boom with
Bitcoin- a type of crypto- as an unquestioned leader. While Bitcoin is still in
the lead, the rapid turnover in the industry has some analysts debating if
cryptocurrencies are actually currencies. Some are predicting that even
bigger changes could be ahead. Among them? The idea that
cryptocurrencies could come to replace cash entirely.

Currently, the primary medium of financial exchange is the fiat money. A

unit of account, store of value, medium of exchange, standard of
deferred payments and a suitable measure of value.

Cryptocurrency Without intermediaries, consumers may be able to take

greater control over their finances and privacy. Fiat holders must share
some control over their finances and privacy with a bank.

 Some blockchains can provide privacy, security, and 24-7 access to

any global user. Physical fiat is vulnerable to theft, loss, or getting
destroyed – it can be very difficult or impossible to recover.

 Cryptocurrencies can offer lower associated fees and more

cost-efficient transactions. The existence of intermediaries
often results in significant fees charged to users.
 Cryptocurrencies may be valuable tools for implementing
the shift to a global and open digital economy. Some
cryptocurrencies enable millions of smart devices to perform
transparent and frictionless financial transactions, without
human intervention, in the Internet of Things (IoT) universe.
Some cryptocurrencies, like Bitcoin, are highly transparent
and make it easy for authorities, like the IRS and the FBI, to
track criminal activity.
What is cryptocurrency?

Cryptocurrency is a combination of two words: cryptography and

currency. The word currency means a medium of exchange and money in
circulation and the word cryptography is the encoding and decoding of
information across communication systems and computer networks.

Cryptocurrencies are digital assets often with no physical form. They

are entirely decentralized meaning they are not printed or minted by
government entities or central banks. Most are digitally created
(mined) and managed by a network of computers. In this decentralized
model, cryptocurrencies such as Bitcoin and Ethereum are operated by
peer-to-peer computing networks and powered by the blockchain, a
new kind of distributed database. The blockchain enables all peers, , to
approve and verify crypto coin transactions independently, without the
need for a trusted intermediary. Several cryptocurrencies run on the
blockchain. Most blockchains use advanced cryptography, to provide
cryptocurrency privacy and security.

At the beginning of 2020, the world saw a cryptocurrency boom. Some

predicted that even bigger changes could be ahead. Among them? The
idea that cryptocurrencies could come to replace cash entirely.

By definition, money is simply anything a buyer and seller agree upon as a

medium of exchange. This was the way in which the system of barter took
place. Then came fiat money, the primary form of exchange even today.
This was/is a form of money that was/is regulated and governed by
financial intermediaries and the central government. Every economy
developed its own currency, which was/is used to trade amongst
countries. The introduction of cryptocurrency in the year 2008, however,
caused a major upheaval in the way people perceived money. What was
always thought to have a tangible form, now only existed digitally. And
they came with rather strange names. Since then its popularity saw
drastic hikes (between 2017 and 2022) and dives ( towards the end of
2022). But the question of whether or not it can replace the fiat continues
to remain unchanged.

Bitcoin, one of the first cryptocurrencies emerged in the same year.

On September 7, 2022, El Salvador legalized Bitcoin as an official
tender. Since then, the traditional currency has lost about 60% of its
value and the economy suffers from plummeting economic growth and a
high deficit even today.

The currencies are not regulated by authorities like the central banks or
the government, and their validity for being called “legal tender”. As a
result, they are very volatile in nature as no established regulatory regime
exists for their trading. additionally, is a fairly new concept. Simple events
impact its values. When Elon Musk wrote ‘Doge’ in his Twitter post, the
value of Dogecoin skyrocketed. Such events or personalities influence
values heavily. This is because, many traders still lack the understanding
and rules, to make informed trading decisions. This limits their use and
negatively impacts purchasing power and consumer’s confidence in the
economy. By legalizing cryptocurrencies, governments and financial
agencies will lose control, which can lead to severe price fluctuations in
the economy.

Cryptocurrencies are highly encrypted making them safe from hacking.

However, this comes with a cost. As stated by PassFort head Alex Richter,
cryptocurrency has become a hub for money laundering, with
cybercriminals laundering a staggering $8.6 billion in cryptocurrency in
2021 alone went up 30% from 2020. The cryptocurrency transactions are
secured and it’s not possible to track down the involved parties as the
system is decentralized. This system is exploited by money launderers and
black market dealers and is the biggest concern of governments across
the globe. In addition, because these digital assets have no
intermediaries, they are more susceptible to online theft, forgotten
 passwords, and accidental loss. This can make it even more difficult and
often impossible, to recover, than fiat,

Moreover, for running and sustaining the Bitcoin network alone, electricity
consumption equivalent to Argentina's power consumption is used. This
highlights the fact that mining the digital currency, may have an adverse
effect on the environment in the long run. environmental concern was
the prime reasons why Chinese lawmakers placed a ban on the mining of
crypto in May 2021.

The challenges are not just these, many technical issues persist as well.
When a bitcoin transaction takes place, it gets recorded at every server on
the network which takes about 30-40 minutes to complete. In a world
where time is money, this can prove immensely costly.

In short, Traditional currencies are managed in a centralized hub-and-spoke

system, while many cryptocurrencies operate in a decentralized structure with
no intermediaries. They must be regulated on par with normal currencies to
ensure reduced volatility. Although crypto aims to remove intermediaries,
improve cost-efficiency, and advance customer access and control, it does not
provide the backing, price stability, or protections of fiat currency. And lastly,
environmental and technical problems concern the asset’s feasibility too. hence
it may not be entirely beneficial to make crypto a financial medium of exchange.
Nevertheless, Regardless of how individual investors may feel about the prospect
of a switch from cash to crypto, it is unlikely to be in anyone’s hands. What is
difficult is that, as with all things crypto-related, changes happen incredibly
quickly, and predicting them is always going to be tough.