Co-founder of the Ethereum (ETH) network, Vitalik Buterin, has recently declared that he does not believe that cryptocurrencies can take the place of fiat currencies. According to him, it is unreasonable to expect this to happen and in fact cryptocurrencies are not at all suited to fulfill the same role as fiat currencies.
Buterin gives a reality check
The global economy has seen better times than today. The effects of monetary policy during and after the COVID-19 pandemic can be felt and the war in Ukraine has also caused tensions.
This macroeconomic woes is reason for some to argue that the era of fiat currency is coming to an end. Major currencies such as the euro and the US dollar have lost a significant amount of purchasing power amid historically high inflation. However, according to Buterin, it is not wise to look at cryptocurrencies as possible substitutes.
For example, a scenario in which bitcoin (BTC) becoming the dominant form of money in the world is extremely unlikely, according to Vitalik Buterin. He also indicates that he does not expect cryptocurrencies to take over the world.
Earlier, Buterin complimented fiat currency. According to him, it was quite impressive that currencies such as the euro and the dollar have remained so stable in recent decades. In addition, monetary policy is extremely complex and people should not immediately have their opinion ready without being fully aware of how the traditional money system works.
Bitcoin as a replacement for fiat?
According to Buterin, replacing fiat currency with, for example, bitcoin could even turn out to be catastrophic. The main reason for this is the limited supply of bitcoin. There will be never more than 21 million are bitcoins. That is of course positive for the value of the crypto currency, but it ensures that, according to Buterin, bitcoin is unsuitable as a national currency.
“We would all be in very bad circumstances right now. What happens if we have a pandemic and you need to increase the money supply? You cannot increase the supply of bitcoin, because it is a fixed supply.”