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Toward cashless economy: Are cryptocurrencies better than cash?





The genesis block of the world's first cryptocurrency - Bitcoin - was released in 2009. At that time, only a few enthusiasts were interested in the technology, and the word ‘cryptocurrency’ itself was puzzling at best. 12 years later, digital coins have become a common means of payment, and governments around the world are in love-hate relationships with the technology, from El Salvador making Bitcoin a legal tender to India banning cryptocurrencies in pursuit of its own coin. The popularity and adoption of cryptocurrencies is growing every year, but cash still offers opportunities unavailable even with the most high-tech coins.
 
Cryptocurrencies are now hot topic in the media. The names that flash around vary, from the well-known Bitcoin and Ethereum to the so-called meme coins vaulting up thanks to Elon Musk. When the new players broke into the financial market, many were interested if this alternative form of money could have any serious impact on the global financial system. Nowadays, the growing popularity and value of the most popular coins make them look like a tasty deal, but only until we compare them with a more widespread and universally accepted means of payment: cash.
 
The penetration of the technology into the masses remains rather low. The prevalence of digital money may grow in a few years, but so far there are difficulties with this: most cryptocurrencies are volatile, and only a few of them support anonymity. As for stablecoins, those are usually centralized non-anonymous projects of corporations or States. Cryptocurrencies, however high-tech they are, still cannot weave together two essential properties of ordinary bills and coins: stability and guarantee of privacy when making personal purchases.
 
Stability versus anonymity
 
The problem of stability can be solved by the introduction of centralized State digital currencies: China is following this path now. There are some advantages in this solution. First, coins like this have a more stable exchange rate. Secondly, they are regulated by the State, while the release of, for example, BTC and Ethereum is determined by algorithms and miners. Price moves of decentralized cryptocurrencies can be so wild, and chances of losing all invested money so high that users of cryptocurrency forums even share contacts of suicide prevention centers, and the UK Financial Conduct Authority (FCA) openly warns that crypto holders should be prepared 'to lose it all '.
 
In turn, centralized cryptocurrencies provide fairly good protection against volatility: in this case, the State is vitally interested in an even exchange rate, protected from unauthorized external influences. At the same time, such a coin has one significant drawback, which is often forgotten by ordinary users, and the State prefers to bypass conversations about it. This is the issue of zero anonymity.
 
The already mentioned China is a good example. Our purchases reflect our lives, and the introduction of a State-owned digital currency facilitates control of citizens. Access to the financial activity of the country's residents makes the task of monitoring much easier and allows the authorities to teach lessons to those misbehaving. Back in 2018, when the State digital currency was not even introduced, some citizens in the country already couldn’t buy about 23 million plane and train tickets due to low social rating. Now, we can only imagine the possibilities that e-renminbi will open to the State.
 
Daily inconvenience
 
Stability and anonymity are undoubtedly important. More often, however, users make choices based on mundane factors such as convenience and safety. The first argument is often heard in disputes: indeed, a digital coin in your smartphone can be fetched faster than a physical coin in your pocket. Some users make a choice in favor of non-cash payments precisely because of this, but others, such as elderly, mentally challenged people and people with limited access to technology, find it utterly inconvenient at best. For now, there is a convenient alternative - cash, which can be used by anyone, from a first grader to an old man. A cashless world will deprive them of this opportunity and cut them off from the society.
 
Another important factor is safety. On the one hand, it feels safer to walk along a dark street when your money is not in your pocket, but is stored in an online ledger in the crypto form. It is much scarier, however, when you forget the password for your crypto wallet or lose your savings as a result of a technical error. Decentralized cryptocurrencies offer neither ‘forgot your password’ button nor any guarantee against cybercriminals. As for centralized coins, these problems could theoretically be solved by appropriate decisions of the authorities... but the experience of Salvadorans, who are now struggling with the government's cryptocurrency app, is “frustrating even committed users of the technology,” says Reuters.
 
Satoshi Nakamoto, the creator of the world's first cryptocurrency, envisioned it as a means of fighting the financial elite and transferring control over finances to ordinary people. In theory, digital coins have a huge potential for fulfilling these ideas, but practical experience shows that this is still a long way off. At the same time, physical money, one of the oldest forms of payment, is still legal tender. Paradoxically, cash now offers more freedom, reliability, and convenience compared to cryptocurrencies. Real competition between them will be possible only when technologies learn to combine all the properties of physical money, but, then again, will everyone agree to live in this brave new digital world?
 
 



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The cashless society from an ethical point of view

The debate about the move towards a cashless society has been at the center of the scene for several years, now. Various angles have been taken by economists, politicians, banking institutions and sociologists. Beyond the technicalities of the debate, lies the question of freedom, of inter-citizen solidarity and of governmental responsibility. The debate cannot remain in the hands of financial specialists, it is first and foremost an ethical, political and societal issue.










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