November 30, 2020

CEX.IO company blog | Cryptocurrencies - can they be considered money or not?

The head of the data analysis department at CEX.IO Broker Yuriy Mazur comments.

Speaking about the nature of money, first of all, it should be borne in mind that people alwaysagreed on what to count as money. For example, in the Russian Empire, labels from wine bottles served as money. Now in the Russian Federation, money is considered to be the tickets of the Bank of Russia, which undertakes to ensure the liquidity of its banknotes. And the liquidity of money, that is, their ability to be exchanged for something else, is their key property. Money should be the carrier of the highest liquidity, as it should give its owner the opportunity to buy the widest range of goods available for purchase. Accordingly, the cryptocurrency in its essence can perform the functions of money, but whether it will do this is up to society through the adoption of this type of exchange equivalent. And this requires the appropriate legal norms, which, alas, are not yet available everywhere.

Another of the most important features of moneyis their security against counterfeiting. And counterfeiting a cryptocurrency with a high hash rate on its network is a much more difficult and often economically impractical task. So, for example, a sixty-four-digit hash of a bitcoin block, corresponding to the target hash of the block and the hash rate of the network, may not be any worse money than banknotes issued by one of the central banks of the world, since "forging" a bitcoin block is extremely expensive and practically impossible task.

As for the opportunity to buy something oncryptocurrency, the answer to this question can only be in the affirmative. Bitcoin is accepted as payment by e-commerce giants such as Microsoft, Shopify, Etsy, and Newegg. Bitcoin is also accepted for payment by many travel companies, such as Virgin Galactic from the Virgin group of Richard Branson.

Also a significant advantage of cryptocurrenciesbefore electronic fiat money is the ability to make offline payments, which makes bitcoin and many other cryptocurrencies at times more liquid than fiat money. It should also not be forgotten that cryptocurrencies implement such a function as "world money", erasing any boundaries.

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