Author: AbuVlad

Since we already have fiat money, a reasonable observer may ask why are cryptocurrencies so important, and while the answers vary depending on priorities of the asker, there is a recurring theme: cryptocurrencies have the potential of performing the functions of money better than fiat money. Issues with fiat currencies that accelerated the invention of cryptocurrencies were:

• Man-made supply: Central banks can easily print fiat currencies to address specific short-term problems, as seen in 2020-21, which devalues the currency and inflates asset prices and daily expenses for the broader economy for the longer-term
• Unequal distribution: Newly printed fiat money is not distributed equally. Central banks can choose to give the money to certain groups but not others, as seen in the US 2008 bail-out of banks that caused the crisis, at the expense of general public
• Intermediation: The fiat financial infrastructure requires trusted intermediaries, such as banks, insurance companies and exchanges, whom are trusted to be able and willing to fulfill their end of a transaction

Cryptocurrencies have the potential to eliminate these problems:

• Coded supply: Supply of a certain cryptocurrency can be fixed, or its supply policy can be fixed in its code and cannot be altered later on, preventing oversupply and devaluation
• Equitable distribution: Cryptocurrencies can be supplied in a fairer and equitable manner if the developers choose to, without prioritizing a powerful party over the rest
• Self-custody: Holder of a cryptocurrency does not need a bank to hold the funds, or a custodian to implement a trade
• Programability: Many cryptocurrencies are programmable money, such as Ethereum and ETH, to be used to build apps and other currencies on top of it, or to be used as a component in other apps and currencies