Quest for a Cryptocurrency: Applicability & Misunderstandings of Money

Started by RafaelJames, Aug 16, 2022, 04:19 AM

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RafaelJamesTopic starter

Cryptocurrency emerged as an alternative to traditional monetary instruments in response to their many disadvantages, but it has not replaced the existing monetary system for most people. Instead, it has provided a new way for individuals to conduct financial transactions hidden from regulatory and tax authorities, or to invest funds in ways that increase them.



However, this situation is no longer desirable for either states or crypto enthusiasts, who want to change the world using blockchain technology. The dichotomy of the exchange and accumulation functions of money creates an eternal problem in the economy. Money can either be in circulation, stimulating economic production, or withdrawn from circulation, allowing individuals to save and accumulate wealth at the expense of economic activity as a whole.

The modern economy consists of two circuits: real and speculative, with money serving as a means of exchange for goods and services. In a real economy, the money supply reflects the volume of work performed by labor and its products.

The creation of a cryptocurrency specifically designed for exchange and not accumulation could solve not only the issues of Bitcoin, but also solve the problem of money itself, becoming the new standard of currency. However, the issue with cryptocurrencies is the fundamental misunderstanding of what money is and how it functions, which is a common problem among crypto enthusiasts.

The idea of independence from traditional financial institutions is appealing, but cryptocurrencies still require recognition by the law in order to function as legal tender. A digital cash that is recognized by law as a means of payment is required to be as convenient as physical cash. Stablecoins, while they solve the problem of volatility, are not a complete solution since they are still secondary to fiat currency. A true, independent digital cash that is legally recognized could potentially revolutionize our current monetary system.
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Дмитрич

Money acquired through the financial market is ultimately used for consumption, although the timing and nature of that consumption may differ. For example, funds spent on Tesla shares today will not be used to purchase a car immediately, but the shareholder may be able to withdraw profits in the future to do so. Similarly, someone who withdraws funds from Apple today may purchase a car now instead.

An analogy to explain this is oxygen molecules in an organ: the organ saves one molecule for later use, but may spend five others in the meantime. The total consumption of oxygen remains high because the ultimate goal is to consume as much oxygen as possible, even with small delays.

Overall, the financial market does not have a negative impact on demand, although it may lead to some individuals being able to purchase goods without working. However, compulsory labor services have not shown significant long-term economic benefits for society compared to other alternatives.
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diy05

The author's lack of understanding of money and the true problems with funds reveals why cryptocurrency cannot replace centralized money.

Bitcoin and decentralization were created to address issues such as inflation caused by central banks printing money without backing it. Cryptocurrencies like bitcoin can be saved due to their popularity, and the built-in deflation prevents anyone from seizing bitcoins except through invasive means. However, the reality is that most people do not use real wallets and instead keep their funds on centralized services, which defeats the purpose of decentralization. This shift towards centralization makes it clear that the move towards cryptocurrency may have been unnecessary.
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JPinto

The concept of assigning roles to participants in a network seems interesting, such as creating a bank-type smart object that requires token investments to function or to vote online. In the future, banks may issue their own cryptocurrency within financial leverage constraints established by the network. A smart contract may be declared bankrupt if not closed after a year, and NFTs can be used to bind real estate objects and cover bank debts among other banks.

To add a new bank to the system requires consensus among users willing to invest their capital or voting by other banks. A fully functional decentralized financial system is possible by utilizing cryptocurrency and linking derivative instruments to smart contracts within banks. Tax evasion can be corrected through editing smart contracts to tax each transaction and transferring tax funds to a state-type smart object. This solution is similar to how NFT creators receive royalties from subsequent sales according to their smart contract.
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esopsygateway

Cryptocurrencies have gained attention for their potential applicability in various industries. One of the key benefits is the ability to conduct secure and efficient transactions across borders without the need for intermediaries like banks. This has made cryptocurrencies attractive for international trade, remittances, and cross-border payments.

Furthermore, blockchain technology, which underlies cryptocurrencies, has the potential to revolutionize sectors beyond finance. It can be applied to supply chain management, decentralized identity systems, voting systems, and more. The transparency and immutability of blockchain technology offer opportunities for increased efficiency, security, and trust in various industries.

However, there are also misconceptions and misunderstandings surrounding cryptocurrencies and their relation to money. Firstly, some people view cryptocurrencies as a replacement for traditional fiat currencies. While cryptocurrencies have the potential to challenge the existing monetary system, they are not widely adopted as legal tender and face limitations in terms of scalability, transaction speed, and stability.

Another misunderstanding is related to the concept of value. Fiat currency derives its value from the trust and confidence placed in the issuing government and its central bank. Cryptocurrencies, on the other hand, derive their value from factors such as adoption, utility, and market demand. This can result in high volatility and price fluctuations.

Additionally, some critics argue that cryptocurrencies facilitate illegal activities due to their potential privacy features. While it is true that cryptocurrencies can offer pseudonymity, the majority of cryptocurrency transactions are transparent and recorded on public ledgers, making them traceable. Furthermore, regulatory measures have been implemented to combat illicit activities, and there is a growing emphasis on compliance and transparency within the cryptocurrency industry.

Overall, while cryptocurrencies have shown potential in various applications and industries, their full integration into the existing monetary system and overcoming common misunderstandings will require further development, regulation, and mainstream adoption.
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