"Thinking that cryptocurrencies can have a utility is not stupid, it's beyond stupid"
Those were the words of wisdom from none other than Charlie Munger, a wise old billionaire in his nineties and the right-hand man to the legendary investor, Warren Buffet. The interview doesn't stop there; it's seasoned with colorful expressions that might raise an eyebrow. Yet, it leaves us with a pressing question: Is there any real-world use for the enigmatic world of cryptocurrencies?
In one of our previous articles (Remember "Is DeFi Just a Big Gamble?"), we dug into the social utility aspect. But today, we're taking a giant leap forward to dispel a colossal misconception that many, including experts and famous investors, seem to have fallen into. The truth is, cryptocurrency isn't just useful – it's incredibly useful. It opens doors to earning opportunities that were once beyond our wildest dreams.
In that interview, Munger emphasized the importance of national currencies. He called them the driving force behind the well-being we've enjoyed over the last century, and he's not wrong. But what remains hazy is the understanding of what a cryptocurrency truly is. It seems that Munger conflates the two, even though they couldn't be more different.
National currencies are state-backed and are under government control. However, the existence of national currencies doesn't negate the presence of alternative payment systems. These alternatives include barter, the use of precious metals, a variety of assets, and even loyalty points.
Choosing one payment method over another is merely a matter of convention and trust. When trust falters, alternatives emerge. We've seen nations like Zimbabwe adopting foreign currencies, such as the Chinese yuan, or those relying on the US dollar as a more stable alternative.
So, why is there so much animosity towards cryptocurrencies?
Ignorance is the root cause – ignorance in its literal sense. Cryptocurrencies, although colloquially labeled as currencies, have little in common with national currencies. Cryptocurrencies come in various forms and serve different purposes. You can liken them to:
1. Membership cards for associations, allowing members to make collective decisions.
2. Shares in a company, offering voting rights and profit-sharing.
3. Safe havens, assets that are believed to retain their value better than national currencies.
4. Loyalty points or rewards in various forms.
5. Financial instruments acting as collateral or enabling tools.
6. Internal currencies for specific groups, akin to prepaid credit systems.
In short, cryptocurrencies have nothing to do with national currencies. They are products of a technological evolution, offering innovation across diverse sectors. If you want to dive deeper into this subject, check out this article on decentralized finance (Decentralized Finance: Three Reasons to Dive In, but with Caution), which delves into the unique aspects of blockchain technology.
So, is the fear that cryptocurrencies could replace national currencies entirely unfounded?
The truth is, no one can say for sure. National currencies aren't set in stone; they evolve over time based on technology and context. Just ask Zimbabwe if they initially planned to adopt the Chinese yuan. Let's not forget that national currencies are merely a medium of exchange with no intrinsic value. The currencies of the future will be determined by trust.
Cryptocurrencies are like the dazzling face of a technology that was initially intended as a payment method but has since evolved into an all-encompassing solution capable of generating value across various domains. This is especially true in the realm of decentralized finance, which offers unique opportunities for generating passive income. So, in the grand scheme of things, believing that cryptocurrencies are just digital fool's gold is a misunderstanding worth reconsidering.
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