Are Cryptos "Real Currencies"?
"What is Real?" is decided by the realities we live in.
Hold on a Second!
Before we answer whether cryptocurrency is real money or not, let’s understand what a currency means.
By definition, anything tangible or intangible can be termed currency if it has these functions.
Medium of Exchange - The efficiency with which a currency can be exchanged for goods and services.
Unit of Account - The ability to price products in a stable measure.
Store of Value - The ability to preserve value over a long period with some level of predictability.
Now by this definition here are a few things that match up to the expectations of a currency.
Fiat currencies like USD, EUR, INR, etc
Gold, Silver, and Diamond
Stocks, Bonds, and Real Estate
Tobacco and Coffee Beans in ancient times
Cigarettes in Prisons
Pokemon card in School Premises.
Just as Cigarettes are valuable assets within the Prison Cells, Fiat Currencies value are valuable assets within the boundaries of their country in most cases.
For instance, Indian Rupee is accepted widely in India however, its acceptability diminishes significantly outside the boundaries of this country.
Now let’s apply the same test to Cryptocurrencies.
Medium of Exchange - Cryptos are exchanged in return for goods and services. Some companies offer cryptos as salaries to their employees.
Unit of Account - Cryptos are used value NFTs, In-game tokens, and Virtual Real Estate.
Store of Value - Large Financial Institutions and Tech Companies hold cryptos like Bitcoin as a reserve currency.
So, cryptocurrencies come out with flying colors in the test of real money.
Final Notes
All currencies have value as long as we believe in them. Once we collectively stop believing the pieces of paper we hold in our wallets have value, their value seizes to exist.