What Problem Does Cryptocurrency Solve?

Hey Jesstackers

All of us in Bitcoin and especially in crypto are here because we can earn extra money; that’s the bottom line. We’ve been forced to look for side hustles, and crypto is a great side hustle.

I think we’re all so fixated on the money we can make very few of us actually think about the problem it’s solving.

Some say it’s a more inclusive financial system allowing us all the opportunity to access financial services and own currency that would otherwise be hard to get through local means.

Other ideas I’ve heard is that it’s a better distribution model than fiat, which is often focused through the banking system, with only a select few getting access to it based on their income potential.

Some say it brings a sound store of value where people can save and be assured that their purchasing power is protected over time and accepted worldwide.

I do agree with all of those, and I think they are great solitons, but if this is truly going to reshape the world, it has to solve a bigger problem than that.

Can crypto solve wealth inequality?

If we look at proof of stake networks, I am not sure crypto solves the problem that fiat presents; it is only in the early stages of its wealth aggregation, so we can’t see the result, but we can see the trends, and I think crypto leads to centralized wealth.

Apart from Bitcoin, which requires proof of work you either, mine, buy, trade or earn it. Even with Bitcoin, it will take years to redistribute purchasing power to savers and reduce the effects of the years of future currency we’ve borrowed.

There are 10, 20, 30-year bonds; Argentina has 100-year bonds. Japan has 100-year mortgages; the borrowing has got out of hand, and unwinding this won’t come without considerable pain, even with Bitcoins help.

I think Bitcoin can push us towards an equity-based system, but with so many fighting against this change, I can’t imagine how long it will take people to accept a new system, even if it’s in their best interests.

Even if we accept a Bitcoin standard, how long would it be for coins to be distributed? And it may take even longer if it's done side by side with fiat.

The fact that a few people get wealthy from crypto doesn't exactly solve many problems.

Can crypto stop corruption?

I think it’s safe to say the amount of fraud and corruption in governments and corporations is a wealth tax we all have to pay. Having a more open and distributed system can help expose the misallocation of resources.

But you have to ask yourself what government or business is going to put their transactions on-chain? Even if they do move to a Bitcoin standard, they are such large entities it would be straightforward to cosy up to OTC desks and have your purchases done off-chain.

So while it may limit corruption, it won’t stop corruption completely. It may stop the printing of money without a penalty, but it can’t stop people from being criminals.

We talk about circular economies in cryptocurrency; what if there is one only for criminal activity? What if your coin is the coin of criminals? What do you do then?

Ownership

Some say cryptos solve for ownership, they can be used to keep track of things, like a tokenised stock or a deed to a home, but you CANNOT take something from the physical world and make it digital. There is and always will be counterparty risk and authority involved to make the connection between the token and the asset it represents.

Transferring a representation of ownership is one thing; transferring actual ownership via final settlement is another idea altogether.

So I think that it does bring a level of efficiency to transferring representation. Still, the idea of digital ownership has been bastardised, and applications have blown way out of proportion.

Holes in the idea

I see these tokens and the ideas behind them; I'm just struggling to understand how they will be enforced. Tokenisation and blockchain will have some application, but I don't people are really thinking through the limitations.

Bitcoins success has got too many thinking that they can replicate it with "better technology", but this is more than a tech play; this is a monetary play as well as a play that realises the constraints of the digital and physical world, and it cannot be overcome simply with better code and additional features.

Have your say

What do you good people of HIVE think?

So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."

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