What Makes Cryptocurrencies Powerful

Unless you’ve been living under a rock, you’ve probably heard of everyone’s favorite Cryptocurrency, Bitcoin. It’s made quite the impact in the years that it’s been around, and I want to explore exactly what makes it, and other cryptocurrencies, so powerful. 

To put this conversation into context, I want to first talk about what Robert Kiyosaki has identified as the three types of money. First, you have God’s money—gold and silver. Named as such because it’s created by God and mined by men. Next, you have government money. This is the fiat currency we know and use today, all over the world. And the third type of money is the people’s money. This is crypto-currency, which have taken the world by storm in the last decade (or slightly more). 

A Closer Look at the People’s Money

What’s incredible about cryptocurrency is that it was never created by the government. And in reality, our money systems started out as systems created by individuals—tally sticks, salt, gold and silver—the government didn’t have their hands in it yet. Cryptocurrency has brought us back to an exciting stage where there’s a currency once again regulated by the people. 

So what makes a currency viable, and how does it relate to cryptocurrencies? There are five main factors.

The 5 Benchmarks of a Good Currency

1. Scarcity

Gold and silver were great forms of money because they were scarce—you couldn’t just produce your own or find it in your backyard. Mining these metals took energy and resources, and you could only mine a limited amount each year. 

Bitcoin only has 21 million coins. There will only be 21 million coins, never more. It’s scarce, and therefore considered a great hedge against inflation by many, myself included. If you’re concerned about what’s happening globally and with different countries creating money out of thin air, consider Bitcoin. In fact, Paul Tudor Jones, one of the most famous traders on Wall Street, has recently taken a position of Bitcoin to hedge against inflation. 

2. Fungibility

When currency is fungible, it’s interchangeable. So a 1 ounce gold coin in South Africa will be treated as a one ounce gold coin in the UK, or the USA, or China. No matter where you go, that currency is recognized for what it is, and can be exchanged. 

Bitcoin is Bitcoin no matter where you go—it’s borderless. And because it’s not controlled or owned by any one government, it’s maintainable as such. 

3. Divisibility 

A good currency will also be divisible. Our current currency is comprised of bills and coins, which make it easily divisible. Gold and silver are also divisible. 

Bitcoin is divisible in fractions—you don’t need to buy a full coin, and can in fact buy fractions of coins. This makes it more accessible.

4. Durability

Durability is where Bitcoin seems to run into naysayers. Gold and silver are obviously very durable, physically. Bitcoin is digital—but does that mean it’s less durable?

I would argue that Bitcoin is extremely durable, because of its open source network. Its blockchain is recorded on many computers around the world, and its computer code has made it durable. Bitcoin can’t be hacked, nor can it be counterfeited, which only adds to its durability.

5. Transferability

Money must also be easily transferrable from one person or institution to another. This is where Bitcoin truly shines. 

Bitcoin, and other cryptocurrencies, have taken transferability to the next level. By owning Bitcoin, you are your own bank. You can store your coins on your phone or computer, and can send it all over the world—all without third party involvement. 

Regular currency requires a bank to be the middle man. In any transfers, your money must first go into the bank, then the transfer must be set up, and in a few days the recipient will have their funds. And of course both you and the recipient will pay fees. Bitcoin allows for instantaneous transfers with no fees or middle man, because no institution owns the currency. 

There are many reasons that freedom-loving people gravitate to Bitcoin—there’s no obligation to use it, and no fees or penalties for partaking in the system. It allows people to go unbanked, or partake in a new system if they are already unbanked. It’s accessible to anyone in the world with a smartphone and an internet connection. Not to mention—you can’t be robbed of your Bitcoin because it’s encrypted on your wallet. It’s not in your mattress, your safe, or in the hands of a bank. 

I’m from South Africa, where a lot of people are unbanked. And if they have a phone and internet, they can download a bitcoin wallet for free and begin to buy coins. Suddenly, they’re plugged in to the world markets.

Think about the potential this creates—right now it’s difficult for someone in Africa to invest in the New York Stock Exchange, with companies and projects that they’re passionate about. Yet if they have Bitcoin, there are certain projects that they can invest in with Bitcoin, which are sold in exchanges. And if someone in, say, India wanted to purchase that coin, now they’re suddenly involved too. 

Cryptocurrency is exciting stuff, and plugs us in to the world at large. It’s not hackable, and it’s very private. (It’s important to note that while Bitcoin isn’t entirely private, there are other currencies which are, like Monero.)

What I hope you can take away from this is the excitement in a currency that has been returned to the hands of the people. We have the power to determine what money is, once again. I’ve been eagerly following cryptocurrencies for a while, and am excited to see the future developments. 

You can listen to my new podcast, Cashflow Investing Secrets here.

Live your Freedom, Live Your Legacy, On Your Own Terms,

M.C.

M.C. Laubscher is a husband, dad, podcaster & Cashflow Specialist. He helps business owners and investors create, recover, warehouse & multiply cashflow. You can learn more about exclusive cash flow strategies in M.C.’s new video series at https://www.yourownbankingsystem.com/