Who hasn’t been hit hard by the rising cost of everything, especially food and gas. This causes people to immediately looked for alternative solutions and just like everything else cryptocurrencies are at the forefront of this conversation.
Inflation: Relying on government-controlled currencies means your net worth could shrink, says George Harrap, the co-founder of Step Finance.
Inflation is continuing to rise, with gas prices hitting all-time highs, fiat continuing to be printed without collateral backing, and families struggling to afford everyday living with their earnings.
The U.S. government just announced that inflation reached 7.9% in February 2022. This places the consumer prices in the country at the highest they have been for 40 years. In addition, the war in Ukraine and Russia is already making economic hardships worse.
Exported products sourced from Ukraine and Russia are already beginning to soar in price. Historically, it is the average citizen who bears the brunt of inflation’s effects as their day-to-day lives become harder to afford.
Simply by holding fiat, people are losing money. In response to this, people are looking to find ways to ensure the money they are earning maintains its value, rather than slowly diminishing in their bank accounts. So it’s not a surprise that people across the world are quickly turning to cryptocurrencies as a way to safeguard their hard-earned cash.
Inflation: Changing the way we recognize value and assets
Across the world, people are realizing that relying on government-controlled currencies puts a person at risk of having their net worth shrink.
We are seeing this happen in nearly every region of the world. The Turkish Lira declined to an all-time low in January. In response, citizens turned to Bitcoin to offer respite as their savings diminished. This is evident in both Ukraine and Russia as the conflict exacerbates.
The reason for the fast-moving adoption of cryptocurrencies lies in the fact that they don’t have a single entity deciding their price or how much is in circulation. Crypto assets provide more agency to the user and don’t rely on a board or specific group that is chosen to dictate their value.
This self-ownership is an important feature, especially for those living in countries with unstable economies. When countries go into economic crisis, limits on what people can take out of their bank accounts is often one of the first moves governments make in order to halt bank runs and capital flight.
How can such a volatile and speculative asset be more advantageous than dollars?
While cryptocurrencies offer an alternative, they are not perfect. Bitcoin is volatile when considering it over a shorter time period, for example day-to-day, with the price rising and falling continuously. So while a holder’s assets are not losing value based on decisions by a government, they can fluctuate wildly. This can cause anxiety and makes interacting with the assets difficult for everyday use.
Their volatility has received harsh scrutiny since its mainstream adoption. On top of this, the space is often known for being an unregulated industry. And even additional assets like Ethereum present problems for practical use cases as its popularity and high gas fees make it expensive to transact with. As such, it costs a lot to use even if a vendor is willing to accept it.
But there is far more to crypto than the most well-known assets, Bitcoin and Ether. Just two blockchains of many, we are at a point where people are weighing volatility and regulatory risks in exchange for currencies that are not pegged to the newly-recognized volatile monetary system of national economies. Volatility can be reduced, and already is – thanks to the fast-moving innovations taking place on other blockchain networks.
A variety of chains means more options and access
Cryptocurrencies and their corresponding blockchains are still growing, changing and learning. As a result, alternatives have been created to provide solutions to the slow, expensive Ethereum and Bitcoin.
An example is Solana, which allows for faster, cheaper transactions which removes some of the issues found on other blockchains. However, it also does not have the same recognition as others.
Avalanche, another emerging chain, is growing rapidly as well with impressive transaction speeds of 5,000 transactions per second. This is significant when compared to Ethereum which currently sits at 15-30 transactions per second until it can witness its long-awaited upgrade.
In addition, the benefits and drawbacks of the different blockchains sometimes differ depending on what part of the world you are in. For example, in the U.S., a user has access to multiple exchanges and networks to transact on. From Coinbase to Kraken – the simplicity of the centralized exchanges is accessible.
Meanwhile, a person in Zimbabwe is locked out of many of the more common centralized exchanges – therefore making the practical conversion of blockchain assets to usable benefits less straightforward.
To grow the crypto ecosystem fairly across the world, multiple chains must be accessible within varying local contexts to ensure this technology can truly benefit everyone.
For example, data taken from Step Finance shows that Istanbul is the top city for users of the Solana dashboard. This indicates that the alternate chain is likely providing a resource that works well within the Turkish citizens context.
Inflation: A multichain future will help
When blockchains beyond Bitcoin and Ethereum can become more readily available and accessible, we will see how a multi-chain future will help alleviate some of the most challenging financial issues we face today.
Today, we have plummeting fiat values and hyperinflation, and uncontrollable conflict and war impacting our everyday spending through exorbitant fuel prices and rental costs. Cryptocurrencies will serve multiple purposes seen by the blockchains they are built on that reflect this diversity.
Cryptocurrencies can continue to assist people in maintaining their livelihoods, providing an alternative to a system that continues to inflate the cost of living, and our quality of life.
About the Author
George Harrap is co-founder of Step Finance, the front page of Solana. George is a veteran crypto entrepreneur. He started in the crypto world almost a decade ago as an early miner. His experience ranges from building cryptocurrency remittance platforms to fundraising for projects with VC and corporate investors.
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