Cryptocurrencies don’t have a political background of their own when compared with fiat currencies. The basic motto of cryptocurrency is to keep your trust in maths and not in central banks.
According to cryptocurrency users, the value of currencies has been reduced by the central bankers during the past few years and this has led to huge losses for people all over the world. The cryptocurrency boosters believe that as time elapses, the algorithms and Cryptocurrencies will replace the central banks and will be able to build a strong political base.
Current Set Up of the Economy
The present economy of the world is built with many trusted financial and business institutions headed by independent & transparent central banks. The trading of cryptocurrencies in this global economy is said to have a huge role, but when compared with the international economy it is insignificant. At present, the trading of cryptocurrencies is calculated to nearly $5 to $6 billion, which is considerably lower when compared to the foreign exchange trade which is nearly $5 trillion.
As per the opinion of many cryptocurrency analysts, when we look into the current demand for cryptocurrency trading, it is clear that cryptocurrencies are going to witness a drastic growth.
If we expect that cryptocurrencies should meet our requirements, we must transact using fiat money. Fiat money is considered essential for the transactions because fiat currencies help to manage the risks that are likely to occur for the enterprises. The value of Fiat money is owned by the government.
Fiat currencies are mostly used for a majority of the business transactions that are done nowadays. The revenue generated, debts handled and all other payments made in regard to the business are done using the traditional fiat currencies. The option for those companies who want to engage in smart contracts on blockchain is to maintain payments through banks and to record them in the blockchain. Interesting to read tweets on fiat currency in this context.
"Our" fiat currency has been backed by "their" oil & factories, & "we" have inflated "our" fiat obligations to such a degree that "they" must now accept negative real returns on capital ad infinitum or else "we" will have to nominally default on "our" fiat obligations.
— Luke Gromen (@LukeGromen) July 5, 2018
According to Paul Brody, Principal and Global Blockchain leader at EY:
“In order for firms to transact on the blockchain, they will want to transact in those same currencies. If I have a deal to buy a product at a set price in euros, and I execute that contract on a public blockchain, then I also want to settle it in euros, most likely. Every time I move money between currencies or hold substantial amounts of a different currency, I’m adding foreign exchange risk to my business, which serves no purpose if it can be avoided”.
He further added:
“We believe, however, that there are mechanisms for regulators to control their own currencies in decentralized public networks”. Stay updated!