Conventional government-run cash currencies – often known as fiat currencies – have been in use now for thousands of years. Compared to bartering for goods and services they were a huge step forward. People were able to trade more easily and over much greater distances. Many anthropologists will tell you that the introduction of money and currencies was one of the key building blocks for creating large cities and societies we have today.
However, in the 21st century, they are beginning to hold us back. We live in an increasingly global world where people want and expect things instantly. For example, people no longer want to wait many hours for a transaction to go through. Or days for a package to arrive in the post.
In this week’s article, we will talk you through 4 key disadvantages of fiat currencies. And how cryptocurrency, especially Dagcoin, can turn these into advantages.
Boosting Global Trade
Domestic and international money transfers can take hours or even days to go through. It doesn’t just affect how long it takes Amazon to ship that latest must-have gadget or book to you, but the whole business world. This can delay huge shipments, such as container ships full of computers and phones or food destined for the supermarkets. In the case of the latter, any delays can result in poor or inedible products.
In today’s world many businesses also hugely rely on just in time deliveries. These deliveries, which could be anything from a part of a car to an ingredient for a well-known food brand can halt whole production lines if they don’t arrive or arrive late, costing companies millions in lost revenue and productivity.
Because Dagcoin transactions take just 10 seconds to anyone, anywhere in the world, there is never the worry of waiting for a transfer to go through. This speed of transactions means goods will be shipped faster and more efficiently than before. Having access to investments sooner will also help start-ups to grow more quickly.
It is not just the increased speed of crypto payments that will boost global trade, but also the lower fees. Not only do regular banks charge you anything from 0.5-5% to transfer money, but you will also often be hit by an additional one-off charge for the transaction, along with receiving a worse than market exchange rate when sending money abroad.
This can lead to some companies losing 1-5% of potential earnings on transfer fees alone. This increases the prices of products in the shops for consumers and even lowers wages as companies try hard to cut costs in order to break even or make a small profit. With cryptocurrency charges for transfers tending to be between 0.1 and 1.5%. Therefore, a switch from the high fees of fiat currencies could see cheaper products in the stores, better wages for workers, and increased profits for companies.
Also, each year governments around the world spend billions trying to prevent the counterfeiting of money. This can be anything from designing and producing money that is harder and harder to forge, to police actions, investigations and court cases to prevent counterfeiting. With cryptocurrencies, as all money is stored digitally and securely, there is no way to forge it or create coins that simply don’t exist.
No Political Risk
Because the price of fiat currencies is dependent on the economy of the country and the government’s management of it, either printing more of it to lower its value or decreasing how much is available to increase it. This can make currencies particularly turbulent to political or economic troubles in a country.
A perfect example of this is the crisis in Venezuela at the moment, which has seen inflation sore to 1.7 million per cent in the last year as a result of poor government management and a worsening economy. This huge devaluation of money has led to an average monthly salary now being worth the price of just three bottles of coke.
This kind of problem is not rare either, a very similar thing happened with the Russian Rouble in the early ’90s after the fall of the Soviet Union and the German Deutschmark in the early 1920s, the latter playing a huge role in the rise of the Nazi Party.
Cryptocurrencies are not run by governments and can be used in most countries around the world. They remain solid even if there are big problems in one country or even a region. Only a globally worsening economy can affect their value.
Better Investment Option
The current monetary system hurts the poorest people and those with the least financial knowledge the most. For example, some people still save cash at home under the bed, in a jar or elsewhere. Some may even have thousands stored like this. Because inflation sees that money is worth less each year, these people are losing money all the time.
The situation is scarcely better for people who keep their money in the bank in a current account or low yielding savings account. Because the rates of interest on these are often still far below the rate of inflation. Even if you don’t, the banks know how to use your money and make a profit from it. It is only when people can begin to invest in stocks, properties and businesses that much higher rates of return, beyond that of inflation, can be found.
With cryptocurrencies, your money is always secure because no individual or government can devalue it by printing or creating more. As more people use cryptocurrencies, such as Dagcoin, their value will also increase. Meaning they will likely rise at the same rate or a little higher than inflation even when fully established.
The current monetary system has bought us so far. From the introduction of the first coins in Greece, in the 5th Century BC, to the modern and fast-paced cities and international trade of today. However, sadly they don’t meet the demands of 21st Century life. It is for the following 4 reasons that cryptocurrencies are the way forward:
Boost Growth – because companies will receive payments more quickly they will be able to ship goods faster and also invest more quickly. Making them more efficient.
Lower Fees – because crypto transactions cost less, this will make things cheaper in the shops, wages higher and increase profits.
No Political Risk – because cryptocurrencies are not fixed to one country or government. They are safe from economic or political issues in one country and even regionally.
Better Investment – cryptocurrencies can’t be devalued by more being created. As more people use them their value will actually increase.
Is there something you would add? Or have a question for us? Get in touch…
Nils Grossberg is an entrepreneur from Tartu, Estonia. Nils Grossberg graduated from the University of Tartu with a bachelor’s degree in History. He is the co-founder and former CEO of Dagcoin OÜ, the software company behind the development of Dagcoin cryptocurrency and its ecosystem.