Cryptocurrency: New Gold or Fraud?

Gold is king! Cash is king! Is it going to be "Cryptocurrency is king"? In era of golden money it was quite simple and easy. How many grams of gold are in golden US dollar coin? How many grams of gold are in golden Deutsche mark? It was quite simple to determine currency rates between different countries. Then, somebody invented paper money. You could use paper money for purchasing, for saving and whenever you want you could go and exchange your paper money for gold. Then, all countries except US removed that connectivity between paper money and gold. Then, US incrementally decreased convertibility of paper money to gold 75%, 50%...and finally no one country support its currency conversion to gold anymore. Instead of valuable gold, now we have worthless paper money and instead fix, we now have floating currency rate dependable on many factors. And then, there was huge financial crisis in 2008 and some big countries(central banks) decided to print money(quantitative easing). They said low inflation(deflation), low employment...there is no risk of pumping several thrillion of dollars into economy.

Top 10 Cryptocurrency by Market Value,   March 15, 2018

And finally someone invented digital currency, cryptocurrency. There are many of them up to now in circulation: bitcoin, ethereum, ripple, stellar... Interested cryptocurrency owners need to put assignment to computer to resolve complex algorithm's problems(process known as mining)  and when computer resolve those problems final result is new bitcoin or some other cryptocurrency. The key advantage of cryptocurrency over paper money is that there is limited number of cryptocurrency that could be issued(for bitcoin it is 21 million bitcoins). And when this number is reached it is only possible to trade existing bitcoins, it is not possible to issue new once. Second feature of cryptocurrency is anonimity, which is bad thing from the country's point of view, because that could increase tax evasion. And third very important thing about cryptocurrency is sending and receiving crypocurrency without broker(banks) and therefore without transactions fees. As a value of any other product/services cryptocurrency value is determined by supply and demand. Supply has been so far in constant increasing but demand has been increasing much more faster causing especially in recent years in dramatic rise of value for the bitcoin. So, if worthless paper could replace valuable gold, why it is not possible that worthless cryptocurrency replace worthless paper. What is the difference? Essentially there is one big difference. Paper money is backed by sovereign country, which require from tax payers to pay their taxes exclusively by its own currency and also pay its obligation using the same currency.

What is the future for the cryptocurrency? From my personal point of view cryptocurrencies supported by the certain governments certainly have the bright future and could be considered as good investment opportunity. Future of other cryptocurrencies  is quite unpredictable. They could be worth of millions but they could be worth 0.



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