A particular currency can be usable only if it has some value. Its reliability depends on its ability to maintain its value constantly, without any depreciation.
In olden days people would use precious metals and commodities as methods of payments because they offered stable value. Later on the world shifted towards using minted currency made out of metal since it had a longer shelf life without much depreciation.
Today’s paper money doesn’t have the intrinsic value of these coins made from precious metals. Nevertheless, it is used extensively because of the ease of carrying it around. Yes people have shifted to electronic payment methods; but it might take a while for them to get out of the bitcoin profit scam mentality and embrace digital currencies whole-heartedly.
Here are a few qualities every reliable currency should have:
Scarcity
The value of a currency depends a lot on its supply. If the supply is too large, the prices of goods will spike up, leading to an economic collapse. There will be economic problems even if the money supply is too small.
Most governments across the world are still printing money to control this scarcity. They also fix the inflation at a certain level so that the value of the fiat currency comes down. However, there are no such issues in case of bitcoin. The issuance rate here is very flexible and changes over time.
Divisibility
A currency is said to be successful only if it can be divided into small incremental units. This is the only way it can be exchanged for all goods and services. Such currency accurately reflects the value of every product or service that is available in the economy.
Utility
Utility is another important quality of a successful currency. You should be able to use it to buy any product or service, in any part of the world. The paper money of today can be exchanged for any product or service, available anywhere in the world. Once the world starts accepting cryptocurrency, this will become much easier.
Transportability
A successful currency is one that you should be able to transfer easily between the participants in an economy. You should be able to transfer the units of the currency within your own country’s economy. At the same time, you should also be able to transfer them between nations through exchange. Paper money makes this possible and cryptocurrency makes this easier.
Durability
In the age of barter system, commodities were used to buy products and services. Most of them could not last for long, which is why they didn’t serve as effective currencies. Comparatively, the minted currency and paper money of today can be stored for long, since they are made of materials that can’t be damaged, destroyed, or mutilated that easily. They will not degrade over time. Being a digital currency, cryptocurrency may be even more durable.
Counterfeitability
A successful currency is one that can’t be easily counterfeited. This way, malicious parties will not be able to flood fake bills and disrupt the country’s currency system. There are systems in place to identify any counterfeit notes in case of paper money. However, crypto currency can never be counterfeited.
Narendra Sharma is a Freelancer Writer, Entrepreneur and passionate blogger. A writer by day and a reader by night.