Most people have no understanding about currency and monetary system. In fact, the U.S. dollars or other countries’ currencies that we have, are all included in the definition of cryptocurrency—they are different from gold or silver—they don’t have any internal value.
Some financial experts might disagree about this, I’ll explain this in detail. The reason why Bitcoin, Litecoin, or Dogecoin are called digital currency is because they are stored digitally on electronic data storage device. Inherently they don’t have any value, same as paper currencies issued by governments.
In the history of currency, economists generally agree that physical commodity used for payment and reimbursement can be defined as currency, such as sea shells or other items used as money in early stages of society development. Later came gold and silver.
These precious metals have many advantages. They are easy to be cut, store, and easily circulated). Due to political and economical reasons, the 19th century gold standard had been replaced by Bretton Woods system from the U.S. government that government would pay $35 for 1 ounce of gold.
Paper money (bank notes) initially was backed by the values of gold and silver, until the government decided to stop the exchange. Since then gold and silver are separated from the paper money system (right now a 1 ounce gold coin is worth $1264).
Although governments promise and guarantee the value of fiat currency through taxing and salary payment, however many governments have abused the fiat currency by over printing it—causing inflation and currency’s value debased. Meanwhile governments are losing their credit. Backed by governments’ credit, paper money is nothing but pieces of paper. Similar to the financial tragedy Zimbabwe, once government lost its credit, its currency would become worthless.
The Zimbabwe hyperinflation incident will not be the first and only case.
Electronic virtual currency basically has same design as fiat currency. The only difference is that, there’s no issuing institution, and no inflation or increased with small annual amount.
Its credit comes from global acceptance of such currency. As the popularity and acceptance for cryptocurrency increase globally, such digital currency will never lose credit or value.
When there’re enough people accepting cryptocurrency, its credit is even more reliable than government’s credit. Currently bitcoin has shown such value, with one bitcoin worth around $500, and 4 years ago you could buy 1300 bitcoins with $1, it has a strong supporter base.
Rapid pace of virtual currency’s development has exposed the critical weakness in our current monetary system. It’s outdated and imperatively needs improvement. Cryptocurrency has brought revolution to such need.
Historically, economic activities promote currency development. That’s why monetary system it’s always behind the rate of economic development. This is how European dollar is developed. It’s driven by the economy. People are always searching for lower-cost circulation of currency, and more efficient payment method.
Crypto currency provides these advantageous:
1. faster transaction: whether it is face to face, or international transaction, it takes just a few minutes or even seconds to complete the transaction, to confirm and used for consumption.
2. decentralized currency. There is no issuer, payment or transaction are not subject to governments’ or organizations’ regulation.
3. Low transaction costs: there’s no third-party’s (financial institution) participation, zero or very low fee, on top of that it is paperless.
4. Does limited amount of money, no inflation risks, no unlimited printing that causes hyperinflation.
5. No worry about counterfeit money. Each virtual digital currency’s transaction can be technically traced, through crypto currency’s private keys to provide protection, no counterfeit money will be produced.
To sum up the advantageous of virtual currency, we can see exponential growth in crypto currencies usage. It may one day dominate international financial markets.
In addition to the well-known bitcoin, they are dozens of electronic virtual currency on the market today, collectively referred to as the court’s alternatives. One virtual currency called Dogecoin has gained investors’ confidence, even more than bitcoin.
Bitcoin has a limited number of 21 million coins. So far 12 million coins have been mine, and the last one is predicted to be dug in 2140. This limited number design is similar to go, but also because of this design, it loses the basic function as a currency: to be widely used in commodity transactions. Because the value is too high, bitcoin’s not popular for the general public.
Dogecoin was created in 2013, its designers are Adobe’s Sydney marketing department’s Jackson Palmer, and former IBM programmer Billy Markus from Portland Oregon.
The total number of Dogecoin is set at 100 billion coins. As of 2014 January 23, there are 34,593,577,154 Dogecoins mined, representing 34.59% of the total. 100% would be mine in the mid 2015.
Due to the large quantity, it’s less likely to be manipulated. And low unit price makes it affordable and more likely to be used in commodity transactions. These advantages are beneficial for Dogecoin’s long term development.
Here are some Dogecoin’s advantages:
1. With total number of 100 billion coins, it’s hard to manipulate Dogecoin’s prices. Its price will stabilize, and beneficial for daily transactions. Relative to other virtual currencies (including bitcoin), Dogecoin is more likely to be widely adopted.
2. Shorter payment confirmation. Dogecoin’s transaction confirmation only takes 3-5 seconds. When I tried it, it took just 1 second to complete the transaction.
3. Dogecoin’s price is independent from bitcoin’s price system. A few weeks before, bitcoin’s price suffered volatile fluctuations, other cryptocurrencies were affected from it. However Dogecoin maintains its price stability, and is completely unaffected by bitcoin price change.
4. After all 100 billion Dogecoins are mined, every year there’ll continue to be 500 million dogecoins available for mining. This solves the problem caused by fixed bitcoin number: deflation.
5. Dogecoin’s official website and its marketing effort surpassed other digital currencies (including Litecoin). Shortly after release it’s included in Wikipedia, and when you search “Dogecoin” in Google, there are lots of useful information available for investors. And often time you can’t find information about other cryptocurrencies. I tried to search for “QuarkCoin”, but failed to find any useful information.
6. Dogecoin’s main purpose is to serve as an trading currency, rather than being a commodity for speculative investment like bitcoin, although bitcoin’s moving in the direction of being a trading currency.
One of the biggest advantages of Dogecoin is its creators are known, this is different from bitcoin.
At present most virtual currencies are created by changing bitcoin’s algorithms. Before the currency is even released, the creator has already mined a significant amount of coins. Then he releases the coin, put it on the exchange, and wait for the price to rise. After the coin’s price reaches a certain level, the creator will dump all coins in the market, and continue to create the next coin.
This is known as “black currency”. Most cryptocurrencies have this problem.
A lot of investors are drawn by the profit potential of virtual currency and bought a lot of these “penny coins”, ignorant of their real value. Even after the price drops, investors still own the virtual currency which has become worthless. This is also a reminder for all interested investors: be careful when you select a crypto currency to invest and don’t leave significant amount of funds or coins on bitcoin exchanges.
In conclusion, crypto currency has revolutionized modern financial monetary system. Crypto currency is here to stay, and will affect everyone’s life.