As the world is facing an unprecedented test with coronavirus striking more than a million people worldwide amidst economic uncertainties, the end of fiat dollar is nigh.

Money is an asset used everywhere in the modern world, for everyday purposes like bills, shoppings, deliveries, investment, etc. Due to the political differences, the world is currently split across more than 190 countries, with many countries owning their own money. Called “Legal Tender”, this money (or fiat currency) is backed by the government and must be accepted as a form of payment in that country. While most people stick to fiat currencies for everything that has a monetary value, a growing number of people who have more confidence in technology and the latest market trends are using cryptocurrencies.

Since the creation of the first cryptocurrency known as Bitcoin, there have been debates about which currency type is more trustworthy and convenient. Cryptocurrencies are built on blockchain technology and use cryptography for an added security. As promising as it sounds, cryptocurrencies are not “Legal Tender”, as they are yet to be backed by governments and financial institutions. Thus, the long running discussion is predominantly made on the conflicting view of whether cryptocurrency or fiat currency is better.

Cryptocurrencies are decentralised, which are designed to be accessible by anyone in the world whether or not that person has access to a bank, instead of centralised entities like governments or financial institutions. Cryptocurrency transfers also happen within a manner of minutes, no banking fees involved and no way to counterfeit cryptocurrencies since blockchains verify all transactions ensuring immutability and transparency, making this new class of asset viable as a future form of money. But the cryptocurrency market appears to be highly manipulated, and there is no way to control it currently. Due to the design of cryptocurrency transactions being private, it makes insider trading harder to track by authorities. Also, innovative solutions like crypto mixers made it harder for authorities to track cryptocurrency transactions.

Meanwhile, government bodies are looking into numerous ways to legitimise the use of cryptocurrencies for tomorrow, as well as a likely replacement to the age-old traditional monetary system that has been used for centuries.

Will Fiat Currencies Be Ever Replaced?

A fiat’s value is dependent on the state of the respective country and banks. As the government controls the supply, the centralised control means that it is subjected to inflation based on the government’s decision. A recent example would be the United States government decision to “print trillions of additional dollars” to stimulate its economy during a national crisis, in order to protect the interest of its people and businesses. Therefore, it is a well-known fact that fiat has an unlimited supply, and is highly susceptible to inflation. Additionally, fiat could be taxed based on a person’s location and amassment. Other issues with fiat currencies include the slow (and often costly) transaction process, risk of counterfeit paper notes, and it being a currency that is usually backed by a variety of resources (e.g. Gold), making fiat currencies an uncertain asset during uncertain times.

With the onset of an ongoing global recession brought about by the global pandemic, many in the cryptocurrency community are seeing a promising future that cryptocurrencies will someday take the place of fiat currencies. Although there are some indicators pointing to cryptocurrency making its way into the traditional business space, it is more likely for mass adoption to take place if one or more cryptocurrencies successfully ‘infiltrate’ the market with real-world use cases. Encouragingly enough, there are a few ‘crypto-contenders’ that are potentially disruptive and could develop success outside of the relatively niche blockchain and cryptocurrency space today.

Bitcoin: The Father of Cryptocurrencies

Most people are betting on Bitcoin (BTC) as the cryptocurrency that is most likely to achieve mainstream adoption on a global scale. The growing awareness of Bitcoin may be attributed to more air-times on traditional finance media such as Forbes and Bloomberg, innovative cryptocurrency products such as Cryptocurrency debit cards, Bitcoin ATMs, In-browser crypto wallets which enable cryptocurrencies to be used for daily purchases and online payments.

Bitcoin has offered to the world a new method of using money - offering round-the-clock borderless infrastructure unlike traditional banking for anyone with an internet connection. Unlike traditional banks, bitcoin transactions are secure as ledgers are stored on the blockchain. Chile and Argentina are some of the countries with collapsing financial systems, there are seeing an aggressive growth in the volume of Bitcoin transactions.

Alternative Cryptocurrencies (Altcoins)

Today, there are thousands of different cryptocurrencies which tried to emulate the success of Bitcoin. Known as altcoins, they are designed to not only act as a form of payment, but they could also be used for a variety of purposes. However, they tend to see lower levels of acceptance outside of the cryptocurrency space. Ethereum was created in 2016 and its blockchain had introduced smart contracts to the developer’s world. This feature enhanced the blockchain by allowing an infinite set of rules to be created and implemented, opening up to many possibilities in using the technology.

Many large corporations and governments have utilised Ethereum for their blockchain-based projects, as they explore the use of blockchain technology in everyday’s application. However, its cryptocurrency - Ether (ETH), struggled to find an actual use case for mainstream transaction purposes, aside from it being the native currency within its own ecosystem. This is fairly representative of many other altcoins as well.

Asset-backed Cryptocurrencies

These asset-backed cryptocurrencies, known as Stablecoins, are blockchain-based payment instruments that aim to eliminate the volatility of cryptocurrencies. They are often backed by fiat currencies (e.g. USD or GBP), commodities (e.g. Gold) or assets on the blockchain (e.g. MakerDAO), thereby representing real fiat currencies like USD or GBP. Thus, this type of cryptocurrency allows the mainstream audience to interact and transact with cryptocurrency like how they are doing with the familiar fiat currencies, without worrying about price volatility and driving adoption growth at the same time.

While Bitcoin provided an opportunity for people to be their own bank, stablecoins are likely to become the stepping stone for governments and financial institutions to introduce cryptocurrencies to the masses. It is evident through the governments and corporations' race towards creation of their own digital currencies, the widespread use of cryptocurrency is inevitable and may happen sooner than we think.

Corporate Stablecoins: Libra

Facebook's project - Libra was formally announced in June 18 2019, which aimed to create a global cryptocurrency built on blockchain to promote ‘financial inclusion’. If the project is successful, it could leverage its operational network of software that boasts over 2.5 billion people worldwide. However, it is largely criticised on the global stage as it represents an existential threat to central banks and financial institutions. Furthermore, Facebook was embroiled in running battles for user safety and data privacy. Nevertheless, a smooth launch of this project would allow the seamless movement of money across all its software and give Facebook even more authority and influence more than they already have. On the other hand, many of its users who have access to a mobile phone are currently unbanked, Libra could usher a new ‘cryptocurrency era’ as they introduce cryptocurrency as the new form of money for the world.

Central Bank Digital Currencies

As corporations are getting their hands on creating their own cryptocurrencies, governments around the world are looking into blockchain and the possibility of creating ‘national digital currencies’ which could co-exist with fiat currencies. In recent years, countries like People’s Republic of China (PRC), the United Kingdom and even the United States have announced plans to roll out Central Bank Digital Currencies (CBDCs) - digital monies that are issued by the national bank. With the rapid decline of cash in society and more private banks, this could potentially give edge to central banks to offer more lucrative tools to users. As stated by the Bank of England, a CBDC "would not necessarily be a cryptocurrency" but would essentially offer the same benefits as Stablecoins: programmability, decentralisation and security, but they could also be thought of as digital bank notes.

Beyond The Foreseeable Future

While the idea of cryptocurrency is slowly gaining traction worldwide, it remains to be seen which cryptocurrency may be able to break into the mainstream market. Bitcoin may have an early mover’s advantage, coupled with its popularity and market capitalisation. However, several altcoins with real-world use cases are also catching up in terms of popularity. Demands for products like Bitcoin ATMs and Cryptocurrency Debit Card/Payment apps are growing around the world, accelerating the use of cryptocurrencies both online and offline.  Although corporations trying to innovate in this field were caught up in regulatory concerns over the creation of their own cryptocurrencies, it will be worth to note that if they collaborate in tandem with governments, there is a chance that the eventual replacement of fiat currencies will be highly likely, driven by the corporations-governments cooperation to introduce cryptocurrencies to the world as the new form of money.