The Need for Currency and Cryptocurrencies

The need for currency and Cryptocurrencies. When human beings were civilized and there was a division of work, the Industrial Revolution began. Individuals began exchanging products that they no longer needed for things. That they had produced. Bartering, often known as exchanging things for goods. Is a type of trading system.

When compared to this, a barter system is significantly less efficient. Because it requires agreements for each and every trade that is completed. Following that, empires began issuing some type of currency, whether it be in the form of seals. Coins, or other tokens, in order to maintain their power. Due to the fact that they were backed by the ruler, they were valued. At a set quantity and acknowledged at that predetermined “face value.”

In subsequent years, precious metals, particularly gold, were the major means of transacting business worldwide. Increasingly popular were gold receipts as a result of the high value of gold and the heft of gold. The receipts were issued by the persons who were in charge of storing the gold. And anyone in possession of a receipt may go to the issuer and request physical gold. By presenting the receipt. When it came to gold, this was referred to as the “Gold Standard.”

Within years of the end of World War II, 44 countries came together. To form the International Currency Exchange System. In which each currency was tied to the US Dollar, which in turn was related to the world’s gold reserves. As a result of the collapse of the Bretton Woods system in 1971. Countries have been free to pursue their own monetary policies. With their currencies appreciating and depreciating in relation. To other international currencies in accordance with their policies.

Currency has two purposes

Currency has two distinct functions. One, it serves as a store of value. (As was more visible when the gold standard was in place). And two, it serves as a medium of exchange. It serves as a store of value for the individual who has it. As well as a medium of exchange when a transaction is carried out with the help of it.

What changes with Crypto currencies?

So, what exactly is different about crypto currencies, and why is there such a fuss. And commotion around the subject? First and foremost, there is no connection. Whatsoever between the crypto currencies that are being generated and gold or any other asset. As a result, while the backing of currency notes today may not be 1:1 with gold. There are gold reserves in existence, and the backing is provided by the government. Through the central bank of the country in question. With cryptocurrency. Also, there is no asset correlation and no government to back it. As there is with fiat currency.

The’store of value’ function of these currencies has been artificially dictated. By the fact that they are traded on exchanges. The fact that someone is willing to purchase a currency at a specific price. Has historically served as the basis for determining the value of a currency. Is there, on the other hand, someone who is willing to purchase the entire supply. At that price, or even just a few pieces? As we have seen in the stock markets, the stock price does not always. Accurately reflect the underlying value of the company. This is especially true in the financial markets.

All we have is demand and supply, and it is these two factors that are setting the price today. The supply of coins is created through a complicated process of currency mining. Even though the process has been overseen by a system of checks and balances. Most of it remains a mystery to the majority of the general public. It is theoretically feasible that the process will evolve and become significantly simpler.

Leave a Reply

two + sixteen =