The interest in cryptocurrency often ebbs and flows, but with each wave of investment a different aspect of the blockchain and crypto tokens becomes the focal point of interest and what causes investors to buy tokens using a dedicated wallet app.
The major selling point of Bitcoin in 2024, for example, is their use in futures exchange-traded funds, where through complex financial instruments Bitcoin can become an investment tool even for people who do not own a wallet.
This, in turn, helped to boost the price of crypto to a peak of over $70,000 in March 2024, as the ability to invest outside of the blockchain created greater speculative interest in Bitcoin specifically, and the rising tide increased the price of a number of other tokens around the same time.
At this point, most people who are buying crypto holdings are doing so fairly openly as a speculative investment; they are buying under the expectation that they will accrue in value and will then sell them for a profit.
However, crypto tokens are designed to be used as currency, and there were some huge dreams of a future where every store would have an option to pay using cryptocurrency, either via an app, a card connected to a wallet or even physical representations of the tokens themselves.
Cryptocurrency is quite unusual as a concept, something that is often misunderstood when it comes to discussions of tokens as actual currency, and at worst can come off as outright obfuscation.
Here is what makes cryptocurrency different from the rest of the money in your wallet.
What Is Money?
Typically, outside of people fascinated by economics, people do not tend to think about what money actually is. All that matters is that you can use either coins, notes or a bank account to pay for goods and services.
This is due to a centralised banking system, where coins and notes are a promise by a central banking authority to pay the sum of money that the coin denotes. Bank accounts are an even clearer example of this centralised ledger as they take out the physical tokens of worth entirely.
These work in various different, exceptionally complex ways, from having the value of a currency tied to a supply of a precious asset such as gold. Other currencies, particularly those minted in the distant past, are literally made with a precious metal or other item of intrinsic value.
More commonly since 1971, fiat money has taken over which has value largely because it is issued by a central government, is backed by said government and is designated as legal tender, meaning that it has to be accepted for the payment of a debt by law.
Modern money, therefore, is a representation of value honoured by a central authority, typically backed by the government which owns the central bank governing the currency.
By contrast, cryptocurrency tokens in a wallet actually exist. They are not a representation of value but the actual unit of value itself, which is often why Bitcoin in particular was known for a time as “digital gold”. Holding crypto in your wallet is akin to owning a sovereign or ingot.
The initial idea behind Bitcoin comes in the wake of a monumental financial crash and devastating financial recession that still has residual financial and political effects to this very day.
Satoshi Nakamoto was not the first to conceive of a currency with cryptography, but the early advent and underground popularity of Bitcoin was the result of a genuine attempt to create a bankless banking system.
When people discuss the notion of decentralised finance (DeFi), it is the idea that, given that any token in your wallet is actually the token and not a representation, the value and ability to use cryptocurrency are not at the mercy of central banking authorities, which can and often do close and suspend bank accounts and payment processors.
The idea behind Bitcoin was that it could be used as currency anywhere because its value was not linked to a central authority but the intrinsic value of the coin itself.
The concept itself was far from unsound, but with Bitcoin specifically it caused quite a lot of problems. The apparatus to generate Bitcoin (mining) through the processing of transactions by design required escalating amounts of wasted processing power.
The other issue was that transaction times were much slower and this combined with notable volatility led to Bitcoin quickly becoming somewhat unsound as currency.
The best way to use it became either as a speculative investment or by using a wallet app or exchange to convert the token to other currencies and use those to pay for goods instead.