Do we actually needs cryptocurrency?
How does it act as a currency?
First we need to understand what makes a thing 'valuable' or it has the qualification to become a currency.
According to history,
Human starts trading by using Barter System.
I am a farmer, I want a haircut.
Thus i use 1 chicken as exchange for your haircut service.
After that human evolve and go through
Shells -> Gold ->Paper money ->Credit Cards-> Mobile payment
So there are a few questions here,
Why shells? Why Gold?Why Cards? and now why Cryptocurrency, especially Bitcoin?
There are a few factors from my point of view:
- Scarcity
- Trust
Scarcity
As we can see if a supply is limit, it holds more value.
People lives on mountain trade using shells,people lives near the beaches trade using minerals.
Today gold is still a very iconic items for people to purchase and keep it as store of wealth,as it has limited supply.
How about cryptocurrency like Bitcoin?
Yes Bitcoin does have its limited supply capped at 21,000,000 unit (21millions)
Think about our paper money then, does it has a limited supply? No.
Trust
At first the trust is build between ME and YOU
'A chicken for a goat.'
'Sounds fair, i will take that!'
Both believe in what each other offer is valuable to each other.
A dollar USD note used to say
'This note is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank'
But now it simply says
“This note is legal tender for all debts, public and private.”
Which means 1 USD used to be able to exchange for a equivalent of gold, but it can't no longer be done now,
and it makes a promise to be broken.
We can assume the 'color-paper' that we use for daily expenses no longer have value.
It is still widely use because we simply 'adapted' to it.
So back to Cryptocurrency.
So far the best executed cryptocurrency in term on adaption is non other than Bitcoin:
- Build on top of the trustless network (Blockchain)
- Fulfill the idea of scarcity(capped at 21mil)
- Largest Network and Volume among cryptocurrencies (Adaption)
and it is still growing tremendously...
So now i believe you have a vivid concept on how cryptocurrency looks like,
on the next post i will talk about the coin's specification and what can cryptocurrency actually do.
Stay tune!
Do comment if have any questions =)