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The most devoted crypto enthusiasts are convinced: Sooner or later, cryptocurrencies should replace the state (Fiat) money. However, not every of the cryptocurrencies is suitable for this role. Why? We will analyze the example of “hard” and “soft” money.
What is soft and hard money
There are different interpretations of the so -called soft and hard money, which can be reduced to two main directions: economic and political. Within the framework of the first “soft money”, those, who do not have any physical support. This includes any modern fiat currencies, the issue of which is not limited. "Fixed money" call any scarce goods: bitcoin, gold, silver and so on. Not all cryptocurrencies belong to the latest type, since many of them have unlimited emission (Ethereum, SOLANA and others).
Often you can find the concept of "soft currency", not "soft money". In the economic environment, terms will mean the same, and in general, these concepts are interchangeable. The term "soft currency" is most often used in relation to countries, which have economic problems of one or another.
From a political point of view, Tough money is sometimes considered those, that they go to support a specific candidate. But they are called so because, that their use is strictly limited and controlled. In contrast, Soft money is used to finance a non -specific candidate, and a whole political party. They do not have such a targeted orientation, How hard, And they can often go to the wrong goals, which were originally declared.
Than hard money is better than soft
"Hard money", usually, are a protective asset against inflation. They give some stability and predictability, since they do not depend on anyone's will. Hard money, usually, you can easily exchange a fairly understandable course for that, What provides them.
"Soft money" do not protect anything from anything. Moreover, Their number is determined only by the desire of the issuer to use a printing press with one or another (usually more) intensity. By and large, Soft fiat money to stay until then, While citizens of a particular country believe in the leadership.
What is the use of soft money leading to
Economics of various countries may have problems: In the USA spring 2023 several banks went bankrupt, Turkish lyre continues to beat the depreciation records, and the ruble costs about one cent. Since the release of any national currency is the prerogative of the state, then excessive emission leads to a decline in the involvement of people in the adoption of political decisions, increases the role of voluntarism in the actions of the authorities, Dressing market foundations and mechanisms. In the economy, unlimited printing of money leads to the following problems:
Inflation. The more banknotes, Moreover, they are valuable. State money is not the only example. Organizations, standing behind cryptocurrencies with unlimited emission, in fact, engage in the same.
When the asset is depreciated, This causes fear of losing everything. People are trying to keep at least something through investments. Often this happens absolutely not consciously and people lose everything, Well, Or almost everything.
Growth of inequality among people. If only a small group of people can print coins, then she will win.
And once yes, Social stress will increase. Ultimately from a particular currency/cryptocurrency, users can turn away for good.
All of the above leads to uncertainty and disruption of plans for life. Coins become too volatile: Today they have one price, Tomorrow on 70% cheaper, And the day after tomorrow on 170%.
In politics, soft money lead to corruption.
The spectrum of the problem is quite large. States have to constantly change the rules of the game: introduce new laws, raise and lower the interest rates of the central bank. Hard money is more practical. Separate mention, Of course, deserve cryptocurrencies.
Cryptocurrencies as hard money
All problems, which are described above, They make it clear: assets, which are now in circulation on the planet, far from perfect. Solution, hypothetically, Could become, eg, cryptocurrencies. However, you need to make a reservation.
Initially, cryptocurrencies were conceived as something decentralized and confidential. However, the evolution of digital assets for incomplete 15 years have taken away many of them far from the original concept. Many are no longer completely decentralized, A number of cryptocurrencies appeared in an unlimited issue, And some projects are modified according to the decision of the developers, What opponents of such updates can hardly affect.
A striking example: Etherium, which was originally on the consensus of Proof-OF-WORK (PoW), And now works on Proof-OF-Stake (PoS). Competition in Pow systems exists at the hardware level: miners must take into account the relevance of their technical capacities, and not just keep a solid share, Like a bank deposit on the balance sheet. Conceptually, The entire POS mechanism about this: In such a system, the right of voting is higher for that validator, which has more cryptocurrencies.
From the point of view of "hard" and "soft" money, Cryptocurrency like Solana, Avalanche and Cardano obviously will not become a new monetary unit, which will relieve all problems, characteristic of fiat (state, paper) currency. Within this concept, Cryptocurrencies of the early period look more interesting, like bitcoin and Litecoin, as well as other "classic coins", possessing signs of historically the first coin.
This material and information in it is not an individual or other other investment recommendation. The view of the editorial office may not coincide with the opinions of the author, analytical portals and experts.