Will we soon hold intangible money?

Initially a product of a promising emergent technology, BitCoin’s performance continues to fall far short of expectations and the overreaching goals it promises, with no viable comeback methods in sight. Would BitCoin be the first example of a digital currency that will become obsolete?

BitCoin prices fall. Source: News.bitcoin.com

The stock performance of BitCoin, which is one of the most represented forms of cryptocurrency and the love-child of blockchain technology, is falling rather steeply from its former glory (currently at USD$3,996, by Marketwatch) and gradually failing to meet its many promises in revolutionising the commercial landscape. Many have become disillusioned with the attractive prospects by which BitCoin’s existence once promised. Despite the status quo, many experts still insist on its comeback, by gaining importance in supporting startups and entrepreneurs to acquire investments and relying on the solid foundation of its parental technology, blockchain. While these hold merits, the core issues associated with cryptocurrency have yet seen any viable solutions. Thus, let’s examine the significance and feasibility of a digital currency in the physical context of society in the era of digitisation.

Illustration: The process of making a transaction using cryptocurrency.
Source: Ameer Rosic from Bloodgeek

The economy is increasingly permeated by e-commerces, e-businesses, digital platforms and softwares and thus has integrated much of its components online. Theoretically, a form of digital currency should legitimately, and quickly, gain popularity in this digital ecosystem. Yet, this ecosystem requires a physical infrastructure, ongoing development and maintenance. This reliance hinders the adoption of intangible offerings put forth as viable alternatives to real commodities, or payment thereof.

From the initial bartering system, logic dictates that the exchange medium should equate in, or be backed by a collateral that has equal worth to, the value of that transaction. The exchange medium or the collateral should have a relatively fixed value as to ensure the value of the medium (i.e. money, specifically currency) which it represents. Currency is always backed by certain assets, and some by gold. In reality, many countries actually struggle with controlling the volatility of their national currencies. Zimbabwean dollars, in particular, had been officially decided to be demonetised by the Zimbabwe’s government due to unmanageable inflation and replaced by various currencies. Now, for cryptocurrency and BitCoin, there is absolutely no assurance that could secure a “safety net,” especially if it is to fall. This is also reiterated by Jay Adkisson on Forbes, and he explains further about BitCoin as “not a commodity,” “not a revenue-producing asset” and a vastly volatile currency.

For these reasons, the rhetoric for BitCoin has lost appeal. Unless with new creative solutions, BitCoin will continue its downward spiral and subsequently meet its impending doom. The whole market of cryptocurrency will likely also follow suit. Nonetheless, this failure may establish a precedent and a valuable lesson on future development on the ways we interact and communicate data digitally. Furthermore, blockchain, BitCoin’s revolutionary parental technology, would remain and allow innovations to come into fruition in the future.