The virtual money in this case (an online statement) doesn’t actually exist, it’s just a value system used by the bank to be translated into hard cash if ever you have to make a withdrawal. But that virtual currency isn’t a thing in reality, even if on the backend it might have its own funky way of working in the financial system.
So how does that compare to crypto? Like with any currency, value is determined by 1) how useful it is to us and 2) what we say it’s consequently worth, so what’s the conceptual difference between, say for example, 20 chainlink (for example) “dollars” and 20 virtual dollars in my bank that represent cash?
Are they *actually* different things, and if so, how?
In: Technology
Some folks have explained the technical differences well. There’s a couple of salient points that have been left unsaid:
1) Cryptocurrencies today aren’t really money. There’s very little you can exchange them for. If you’ve got bitcoins and want to buy a TV, first you have to exchange your bitcoins for fiat currency of the nation you’re in.
2) Cryptocurrencies are unlikely to ever be money in countries with reasonably strong central governments. Central governments are not going to give up control of the money supply to a commodity they can’t govern. If more businesses started accepting bitcoins in the US, for instance, the US would pass laws outlawing bitcoin as currency. They haven’t done so because as of yet it’s not a threat.
So Cryptocurrencies aren’t money at all. They’re a commodity with no inherent usefulness except their proscribed scarcity. This is mostly true of gold too (though gold has a few uses) but gold’s mythical value has been built into our consciousness for thousands of years. Cryptocurrencies are much younger than that and there is a very real risk that they go to zero or close to it at some point.
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