Which is A Better Store of Value – Crypto or Fiat

Which is a better store of value – Crypto or Fiat

Critics of cryptocurrency have sometimes referred to digital currency as “Monopoly money” – referencing the popular board game Monopoly, which has long served as a metaphor for capitalism-writ-small. The implication is that cryptocurrency is nothing more than a worthless toy. But more and more, inflationary government-issued fiat currency seems to be the actual Monopoly money – especially with the emergence of innovative new stablecoins backed by precious metals.

Monopoly Money Deflates, Fiat Money Inflates

A user on a cryptocurrency enthusiast Facebook group pointed out that the game of Monopoly sold for US$2 in 1935 – yet now the pretend paper money from said game sells for $50. And funnily enough, while the value of Monopoly money has increased since 1935, it now takes roughly $19 to match the purchasing power of $1 from 1935. (Interesting to note the proximity to 1933, the year in which the USA began its abandonment of gold-backed currency.)

A Brief History of Currency Backing

Throughout history, currency often came in the form of coins minted with precious metals such as gold, silver and copper. But eventually it became cumbersome to conduct retail commerce with precious metal coins directly, so the coins or bullion would be held in banks, who exchanged paper notes which could be redeemed at any time for their worth in gold or silver. These paper notes were then traded themselves and held value – but they were always backed by something of real value.

This began to change with the increased popularity of fiat currency. The term “fiat” comes from Latin and means “let it be done” – i.e. the value comes from the order or proclamation of an authority, and nothing more. While fiat money was first used hundreds of years ago, the 20th century is when it became the dominant form of currency, culminating with the U.S.’s unilateral cancellation of the U.S. dollar’s convertibility to gold in 1971.

Depending on one’s perspective, fiat currency certainly has advantages, such as giving governments the ability to more closely regulate money supply and inflation. However, there are great dangers to fiat, such as the possibility of hyperinflation when the issuing body can no longer guarantee the value of its currency. Thus, fiat money becomes a very dangerous game over the long run – especially in times of economic instability and crisis.

Currency backed by immutable value such as precious metal, on the other hand, has proven over thousands of years to be incredibly stable no matter the ebb and flow of the economy.

Precious Metal-Backed Stablecoins

To this end, Stably has taken the revolutionary step of developing a cryptocurrency to be backed by precious metals. Anyone in the cryptocurrency space will be familiar with fiat-backed tokens such as USDT or Stably’s own USDS. Fiat-backed stablecoins serve a very useful purpose, but Stably isn’t stopping there. Visit our Stablecoin-as-a-Service webpage to learn more about how we are committed to providing the widest possible range of stablecoin solutions, and in 2020 will introduce both gold-backed and silver-backed stablecoins. By doing so, Stably will eliminate the obstacle of crypto volatility, as well as safeguarding against any potential instability of fiat currencies – providing a viable, practical cryptocurrency solution to the world.