At the moment in which money arises, it is born from the need of people to have an effective exchange method where uniformity is essential; payment methods throughout history have been changing, and Bitcoin Halving has been represented in various ways.
One of the greatest inventions worldwide is the creation of paper money, which was born to fulfill three essential functions: a form of payment, a unit of account, and a reserve or means of value.
Today, the banknotes and coins that we currently use as a means of payment for goods and services are considered fiduciary currencies, which have an intrinsic value based, as in the case of cryptocurrencies, on the trust that people give to these units.
Just as it is said, the states are in charge of giving support and value to the currency units issued in a particular country since the elaboration of each banknote does not refer to the value indicated by its physical team.
This means that a bill of 100 or 1000 dollars is not really worth that amount. Since its creation or issuance process does not represent said value, its value is given by the authority of a country, and the trust that users grant ends up supporting the declared value of a traditional currency.
This is how history gives value to banknotes. Still, we are currently in an era where technology has turned finance upside down. As a result, there are more and more technological adaptations that finances go through.
Cryptocurrencies revolutionize the way we see money
Due to the infinity of operations carried out daily worldwide, where they are all operated through the payment of some type of currency, the need arises for these operations to cross borders.
Indeed, although it seems illogical, financial operations are often limited by geographical borders, such as in the case of international transactions, which generate high costs. Therefore, it is essential to have bank accounts in other countries to carry them out.
It is there where technology has had to intervene to facilitate the processes of commercialization and acquisition of goods and services from anywhere in the world, and credit cards have emerged, for example.
Just as these resources facilitate the acquisition of goods and services, there are also those known as digital currencies or CRYPTOCURRENCIES.
This new opportunity to carry out operations or financial transactions from anywhere globally, without time or space limitations, has been very attractive.
Although cryptocurrencies have two factors that make them risky in many cases, they are their volatility and the lack of technological and financial education worldwide.
Although many companies and prominent investors are indeed considering them as an option in their investment portfolio, individuals also want to diversify the possibility of obtaining higher returns based on their savings.
At the moment in which cryptocurrencies were born, it was one of the most challenging moments in terms of financial and economic aspects worldwide; the mortgage crisis in the United States took the financial market into a tailspin and crossed borders unexpectedly.
Digital fiat currencies vs. cryptocurrencies
Cryptocurrencies were created to dissipate and even try to combat inflation, whose impact causes the most significant damage to the individuals of a given society.
Because the primary measure of governments is to issue the most significant number of banknotes in the face of a crisis, which worsens the situation since it is helpful to have a more substantial number of currency units if the value of goods and services has increased simultaneously.
It seems that now, given the scarcity of paper money, it is more convenient for governments to manage the option of Fiat currencies, but from a digital perspective, where the issuance of paper or material currencies will be reduced, and transactions will be carried out digitally.
It is there where the question arises, are digital Fiat currencies the same as cryptocurrencies? The answer is no; digital Fiat currencies have the same backing as printed ones, only they are not issued to reduce costs in terms of issuance.
While cryptocurrencies are a completely different concept based on a BLOCKCHAIN PLATFORMthat completely cancels the intervention of third parties, the exchange processes last, leaving everything in the hands of the users.
Cryptocurrencies represent the most outstanding financial innovation from a digital and technological perspective. Still, they have not yet managed to combat the volatility that causes so much damage to third parties since, in many cases; it cancels the possibility of future investment.