Cryptocurrency started out on a limp. The first-ever – Bitcoin, only became a hit in the legendary 2017 bull run – 8 years after its launch. But even in the leadup to and after 2017, several cryptocurrencies were introduced that proposed entirely new ways of doing both finance and completely unrelated fields. Think Ethereum and smart contracts, or Monero and ZCash, for unprecedented privacy. These are examples of compelling products for cryptocurrency, which are above and beyond the original idea of a decentralized/peer-to-peer currency.
Bitcoin started it all in 2009. Eleven years on, it has rallied the cryptocurrency industry to the forefront of finance. Crypto has been wildly successful – defying predictions of imminent collapse or bubble bursts. So much that it’s not a stretch to actually imagine a future takeover of the finance space by the industry.
But how would such a takeover look like? Wait – how would it begin? And what would it mean for people, governments, and the global financial system? Let’s explore these scenarios in depth.
The Making of a Crypto Takeover
Let’s begin by seeing the steps that would lead up to a complete crypto takeover.
#1. Growing Public Interest
If there were ever to be a crypto takeover, it would start with a major increase in interest from the public. For instance, in 2017, the massive crypto rally led by Bitcoin was mostly fuelled by a surge in user interest: millions of people interacting with the new kind of currency one way or another – be it trading, selling, buying. This interest helped push crypto into the forefront of finance. A currency has only as much value as we ascribe to it – so for crypto to be accepted to the point of taking over the scene, it would first need to see unprecedented levels of interest and adoption.
#2. Industry Impact and Response
As more people adopt cryptocurrencies, industries will be left with little or no choice to adapt. An increased prevalence of the currencies would force both physical and digital retail stores to embrace it. On its part, the financial industry has no choice but to design crypto-oriented services – a factor that will bounce back to create more demand among consumers.
#3. Governmental Response
Naturally, governments would not be quick to embrace cryptocurrency, given the decentralized nature that renders it immune to any centralized/regulatory control. As you can imagine, governments would rather deal with Fiat currency, which they have direct control over. However, as more people start embracing cryptocurrencies, governments will have no choice other than to acknowledge them and probably impose stricter regulations on how they are exchanged, traded, and transferred.
#4. National adoption
After the government acknowledges crypto, the possibility of national adoption would not be too far off. At this point, the majority of the population would be using crypto for everyday transactions, trades, and so on. The government will have instituted crypto-friendly policies to facilitate a healthy environment for this to thrive. Governments will have reconciled themselves to the inevitability of an all-crypto finance model.
#5. International adoption
As more countries enact crypto-friendly policies, this could likely be replicated in more and more countries, and before you know it, a crypto era could be ushered in before our very eyes.
The Benefits of an All-crypto Model
The question arises: why would a crypto takeover matter? Why are we considering this at all? Let’s see the advantages of an all-crypto system.
One of the biggest selling points of cryptocurrency is the decentralized nature that protects it from any kind of regulatory control or state interference. Instead, crypto relies on a cryptographically secured, distributed network of users who maintain and secure the system. As such, no single player would be able to influence it one way or another.
#2. Free from manipulation
Unlike Fiat currency, which is controlled and released by central banks and hence easy to manipulate, cryptocurrency is self-issuing. The control or manipulation of a currency can lead to hyperinflation. This is what happened with Zimbabwe’s currency. The government’s overprinting of new currency to combat widespread poverty only led to a valueless currency – which led the country to resort to the US dollar.
#3. Minting costs
It costs money to make money. Think of the American penny, or cent, which costs 1.99 cents to make. Printing, minting, and circulating Fiat currency cost a lot of resources. Cryptocurrency exists only in the digital space, and these costs would be eliminated entirely.
Cryptocurrencies run atop the blockchain – which is secured with modern cryptography and is distributed across a network of thousands of users (nodes). A distributed network removes a single point of attack and ensures that even if a few nodes go down, the rest will continue protecting the network. These factors make crypto secure in a way that cash is not.
#5. Getting rid of intermediaries
Cryptocurrency is a peer-to-peer currency, which means an all-crypto model would remove the fees and bloat associated with intermediaries. This also means lower transaction costs and fees when purchasing things online as well as when sending money across borders.
The Downsides of an All-crypto Future
While an all-crypto model sounds ideal, there are disadvantages to it.
#1. Fiat losses
Let’s begin with the immediate after waves of an all-crypto transition. If it were to happen, the value of Fiat would take a beating, leading to a large section of the population enduring major losses.
#2. Uncertainty and costs
An all-crypto transition would not be cheap – in terms of the effort needed and a crypto-friendly infrastructure. This would involve grand plans, talent, and a careful, methodical approach, probably taking several years. This would cause an unstable financial climate and likely trigger consumer uncertainty.
#3. No oversight
Decentralization, which renders manipulation of a currency impossible, is one of the endearing qualities of cryptocurrency. But sometimes, a bit of manipulation can be valuable, especially when it comes to controlling inflation, curbing crime, and so on.
#5. Possible confusion
At the time of writing, we have over 5,000 cryptocurrencies, according to Coinmarketcap. This is already confusing to investors and traders. If a country were to adopt crypto as the main model, which crypto would they offer and why? If it’s many coins being used at the same time, wouldn’t that cause confusion? How would users keep track of exchange rates?
So there. A crypto takeover would likely be like crypto’s growth itself. Slow, organic, and sure. In this case, though, that would be years, or simply never. However, if we were to reach that stage, it means cryptocurrency would first need to achieve wider levels of adoption and acceptance than now. But what’s clear is that the financial industry would drastically change – whether for the better or not.