Today, cryptocurrency can vary on whether it has intrinsic value or not.
Bitcoin could be classified as a commodity money, since it’s worth something on its own while not being legal tender.
But other forms of cryptocurrency - typically referred to as “stablecoins” - are backed by some sort of physical money, such as gold or fiat money.
Some cryptocurrencies are limited in number: Bitcoin, for example, only has 21 million that can be mined in total;
unless Bitcoin’s protocol is changed to allow for a larger supply, once the last bit is mined, that’s the end.
Still others are unlimited and produce new coins every year.
So, how reliable could cryptocurrency be in replacing our current fiat system?
It already meets four of the six characteristics of money: since it’s digital, it’s durable and won’t wear out at all;
it’s extremely portable, thanks to digital wallets; it can be divided into smaller amounts; and each type is uniform in each of their coin’s value.
The difficulty would be in fulfilling the last two characteristics.
Since only some cryptocurrencies have a limited supply, successfully switching over to digital currency would run the risk of undergoing instability in the money’s value.
In order for cryptocurrencies to be worth anything, though, everyone in the economy must accept it as a viable currency to exchange for goods and services.
Without the people’s confidence in its value, it would be worth nothing.
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