Reevaluating Money in the Era of Cryptocurrency

Cryptocurrencies like Bitcoin still present a conundrum for professionals across industries. After all, the introduction and subsequent fervor surrounding the rise of cryptocurrencies in the past year has called basic economic foundations into question. What makes something valuable in any case? Since money has no intrinsic worth (i.e. practical use like natural resources or goods) it can be difficult to separate why certain currencies have more value and stability than others. Often, the case of evaluating crypto and non-crypto currencies is one that requires a case-by-case examination. Nevertheless, today we’re going to explore several trends and factors that have seemingly flown under the radar –– until now. 

Fungibility

One thing that does separate government-issued currency from the typical cryptocurrency is the issue of fungibility. When something is fungible, it means that you can mutually exchange it. So “regular” cash is fungible because it can be used for any purpose –– one dollar spent at a gas station holds the same value as one dollar spent at the grocery store. Cryptocurrencies, however, lack this universal fungibility –– at least right now. (For instance, you can’t pay for meatball sub with Bitcoin.) The way in which cryptocurrencies are valuable is in their specificity –– the fact that there is a finite amount of Bitcoin makes it a natural fit for collection and collectors. Still, the “real value” of Bitcoin for investors is the ability to sell them for government-issued currency. That’s something that professionals should always be aware of.

The New Company Scrip

Bitcoin and other cryptocurrencies aren’t the first instances of “other” currencies within the American economic system. For years isolated coal companies paid their employees in company scrip –– vouchers and money that was only transferable at company stores. In fact, company scrip isn’t really a relic of a bygone era. As recently as 2008, Wal-Mart was forced to stop paying employees in Mexico with company vouchers. In relation to cryptocurrencies, company scrip is a frightening reminder of the influence currency can exert in certain situations. And now that the retail leviathan Amazon might possibly enter the realm of cryptocurrency, that lesson is especially apt.

Security

How money is held and protected has changed drastically in the past few years thanks to the advancement of digital technology. As such, it’s not surprising to see industries as well as individuals prioritize their online assets. Again, government-issued currency enables this type of system. Everything from pharmacy credit card security, down to personal-finance insurance is handled in roughly the same way under a single-currency model. Conversely, cryptocurrencies often can’t offer the same sort of fraud or theft protection because they lack the infrastructure to do so. They are, in the end, a risk if nothing else.