Fiat money is fiat money whether it is in the form of bank notes or balances in a bank account. Fiat money is government backed in the sense that it is legal tender, that is, the police and the courts will not help enforce the repayment debt in case the debtor chooses not to accept legal tender as payment if not explicitly agreed otherwise beforehand. Also, if cryptocurrency were accepted as legal tender, taxes and fines could be paid in it and it could be used as a unit of account by those entities that have an accounting obligation under law. It is possible for cryptocurrency to be made legal tender.
In principle, there is no reason why cryptocurrency could not completely replace conventional currencies used as fiat money because it is possible for cryptocurrency to be made fiat money. After all, the reason cryptocurrency is called cryptocurrency is because cryptocurrency transfers are recorded on a cryptographically secured distributed ledger. Fiat money is called fiat money because its value is not backed by anything universally recognized as having value such as a rare commodity such as gold or some other precious metal. Instead the value of fiat money is based on its status as legal tender. There is no reason why cryptocurrency could not be made legal tender, too.
The practicality of making a cryptocurrency legal tender (= fiat money) is another matter. The volume of transactions in existing fiat currencies is enormous compared to even the most scalable of cryptocurrencies. A good cryptocurrency must be sufficiently 1) scalable, 2) secure, and, 3) decentralized. Sacrificing security would hardly be acceptable. Sacrificing scalability is out of the question if the goal is to replace conventional fiat money. If decentralization is sacrificed, then what we get is a version of conventional currency where instead of each of the tens of thousands of smaller or larger financial institutions having private ledgers of their own, each of them would be using a gigantic ledger whose immutability would be cryptographically secured in a network having a small number of full nodes. That would, paradoxically, be a more centralized version of money compared to what we have now. In fact, Christiane La Garde, the head of IMF, proposed creating a central bank controlled cryptocurrency where everyone, including private citizens could have an account. Some economists have supported giving everyone an account in a central bank because that would allow for negative interest rates for one thing.
Of course, you could build a second tier network such as the Lightning Network on top of Bitcoin to implement scalability. But the problem is that the governments are trying to stop money laundering and tax evasion. Used together with privacy coins, Bitcoin + LN would probably make money laundering a bit too easy for most governments to want to grant BTC or any other crypto the status of legal tender. Whether or not it would be technically feasible to have crypto completely replace conventional fiat is a complex computer science problem but would be probably solvable through techniques like sharding.
Rather than by the currency use case of blockchain, I'm far more optimistic about utility coins such as STEEM or security coins. Security coins have a security as their underlying asset. They are not trustless but have significant potential in adding liquidity to traditionally highly illiquid markets such as high-end real estate or extremely valuable works of art.
Yes, definetly yes!
I am very sure that the crypto currency will one day become a substitute for the paper currency currently circulating. But, it's not Bitcoin (BTC), Ethereum (ETH), and other crypto currencies that exist today. Why? Because they still have the following disadvantages:
Because the crypto currency currently circulating today (except stablecoin) is still very volatile, this means that it is not feasible to be used as a payment instrument like traditional payments.
The currency must only have around 0.1 - 1% volatility per day, while the currency Uang can experience price volatility of up to 30% in 24 hours.
2. Difficult to use
Indeed, there are now many people who can use crypto currencies, but for ordinary people it is still very difficult to understand and use them. This must be compiled, so anyone can use it easily.
Even today the crypto currency regulation is still a very big problem for developed countries, and becomes a problem that cannot be solved for developing countries.
Actually there are still many shortcomings of crypto currency to be juxtaposed as a legitimate payment instrument. Therefore, this will be one of the challenges for crypto developers to provide an "exit point" to solve current problems.
I believe it's certainly possible, but I don't believe it's likely to happen any time soon.
The economic impact of such a shift would be devastating to many people during it's inception, and those devastations would be magnified by whatever exploitation's are found in the technology.
Adoption and fundamental understanding of the tech wouldn't be an easy hurdle either. I have learned just how complicated this blockchain tech really is, just by trying to explain the intrinsic value to "intelligent" people. Tangibility is always the first thing to come into conversation, and to me, this is the least important aspect of the intrinsic value. It's hard to explain to people, that a blockchain maintains verifiable property with value, protected by the integrity of transaction verification on a network. Their next question is usually always "what if the government shuts it down...?" sighs..
I have not given up my mission to educate people on this topic, but the task has become rather daunting. Either they get it and become addicted, or they don't and become dismissive. I'm sorry to say, the vast majority have been rather dismissive.
I predict it will just smack everyone in the face one day. Anyone who thinks the world governments haven't already begun preparing for a mass shift is foolish in my opinion. It will come, but it will be guided by the powers that already control the worlds wealth. Any deviation to this theory, would really surprise me.
Theoretically a country has the right under its sovereignty to use whatever currency it likes. Trading with other countries might be a small issue but it wouldn't be insurmountable.
The one issue I think right now most countries would have with the idea is that cash is often used in secret government projects and law enforcement's use of cash such as undercover investigations and as evidence in charges dealing with bribes. Since cryptocurrency involves open ledgers that are public then there is a slight chance a savvy criminal might deduce the cryptocurrency is connected to law enforcement. Serial numbers on dollar bills don't have that kind of liability. This would put the lives of undercover law enforcement officers at risk.
I don't think so.No matter how much i want that to be the case it is just not feasible unless we can find a way to pay for goods and services offline when there is no internet with cryptocurrencies,paper money is still going to stay even then it is going to take at least 20 years maybe more before cryptocurrencies is globlally adopted.
Yes, it could be done. There are tons of electronic payment systems around. If all use of cash were replaced with a cryptocurrency, that cryptocurrency would have to be a fairly centralized Proof-of-Stake coin. But the disappearance of cash would be a loss. Electronic systems of payment rely on the ubiquity of broadband internet and no power outages. Without cash there would be no way to transact financially at all if internet or power were out.
Absolutely. Paper can always replace paper it comes down to the will of the person who is exchanging their currency for something they wish to acquire. It could happen literally overnight if it had to. That is reassuring to crypto enthusiasts and terrifying to those that are leery of anything that involves national currency policy.