Surely, some of you will automatically say, “Of course, they could!” However, things may not be as easy as they seem.
First of all, any value to replace cash must carry out the functions of cash money. I mean ‘at least’ carry the functions of money. Otherwise, the current order of the world will remain intact.
But, what are the functions of money?
- Money is a medium of exchange. It facilitates transactions. Without money, all transactions would have involved direct exchange of one good or service for another.
- It must serve as a common measure of value. The value of all goods, services and wealth should be expressed in terms of price and prices are expressed in terms of money.
- Money must be portable. Individuals should be able to carry money with them everywhere.
- It must be divisible. Money must be divided into smaller units of value while keeping to carry out its functions.
- It must be durable. Money must withstand being used repeatedly.
- Money must also serve as a store of value, which means it should be able to be used as a means of saving, because money its value over time.
- It should be able to serve as an instrument of Monetary Policy as well as an instrument of Financial, Industrial, Domestic and Foreign Trade policies.
Surely, money has other properties as well, in addition to the ones I mentioned above. As you may have noticed, I said, “Monetary Policy”, not “Central Bank Policy”; because, although monetary authorities will exist in the future, I highly doubt that Central Banks will.
Once the cryptocurrencies start carrying out the abovementioned functions properly, there will be no need for a “monetary authority” as such institutions will fade into history with the emergence of Blockchain technology.
When we take a good look at each of the functions of money, we can see that cryptocurrencies have a long way of maturing before it’s publicly embraced. However, we all know that everything can change overnight. Some expected or unexpected events may oblige everyone to use cryptocurrencies.
When email first entered limited use, no one believed that it could become an integral part of our lives. Today, people feel the same about cryptocurrencies. We shall see together what happens.