Any casual observer would at the very least see plenty to be concerned about. For instance these online currencies have grown tremendously in value since they were first launched in 2009. Bitcoin, the very first cryptocurrency for instance has risen in value by a staggering 9000 per cent in just one year!
Cryptocurrency seems to have come into existence not only for the purposes of creating an online currency but to also guarantee an economy that was never going to be controlled by fractional reserve banking. Its’ very structure seems to confirm this. Right from the onset this currency was deliberately de-centralized in what looks like a determined effort to minimize the chances of its/ control and supply ever falling into the hands of one regulatory body capable of tinkering or altering its’ supply and growth as is the case with all currencies of the world today.
The way it works is that everybody in “the virtual money” economy is able to keep track so that when a transaction takes place everybody’s records are updated accordingly. This in addition to the fact that participants’ computer processing resources are also used to back up the “economy” and transactions makes it virtually foolproof from tampering, fraud or anybody increasing the money supply beyond the set limits which are designed to keep the virtual money scarce and well behind the growth of the economy it encompasses. This is one of the reasons for its’ continued phenomenal growth in value despite the skepticism of a number of renowned experts across the globe.
Many fear that currencies that are based on fractional reserve banking can NOT possibly compete in the long term with online currencies that are not?
What is fractional banking? This is the system used all over the world which encourages an almost unfettered growth of money supply as central banks only seek to tinker with interest rates in a system that encourages speculation and the rapid growth of money supply by banks.
The recent economic crisis that has swept across the world and caused unprecedented havoc has highlighted the weaknesses of the fractional banking system used worldwide and has caused more and more people to be extremely concerned about it. And more so its’ perceived direct link to the economic crisis as a result of the uncontrolled growth of money supply.
Even more alarming is the fact that this fear of world currencies collapsing against virtual money seems to have been justified by some governments like China and Brazil, among others, who have started regulating the use and exchange of clyptocurrencies like Bitcom against their national currencies. Observers however feel that the US government and other world economic giants who are yet to make a similar move will have no option but to follow suit and do something about clyptocurrencies soon.