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We have come a long way since the days of a barter system.
It hasn't been necessary to have a specific good and trade it for some other specific good for a long time. For most of written history, there were only two types of currency: fiat or commodity. Fiat currencies have been the dominant currency since the 1970s when the U.S. ended the Bretton Woods system and abandoned the gold standard.
Fiat currencies are great because they don't require physical commodity reserves and countries can control their own money supply. Currencies can be valued constantly against each other in floating exchanges. As for integrity and widespread implementation, governments are generally trustworthy and are a central regulating force that ensures transactions are fair, accurate, and not manipulated. Today, with the advent of cheap computing power and networked systems (i.e., the Internet), there is a new contender to the currency game. The new guy to disrupt the duopoly of currency is the cryptocurrency. These are Bitcoin and its peers that have only become feasible in the last twenty years or so.
What Cryptocurrencies are, and their benefits
Cryptocurrencies exist only in computers. This shouldn't scare you, though, because the majority of most fiat currencies also only exist as numbers in a computer system. They require distributed systems to ensure integrity and reliability, and they can be a good alternative to national currencies. They are, in the simplest terms, digital records held by many parties that track how much currency any single wallet holds.
Some of the benefits of cryptocurrencies include decentralization, deregulation, anonymity, increased transaction transparency, and the facilitation of cross-border trade. Cryptocurrencies are not based in any single country or jurisdiction, because the ledgers and servers are spread out over the globe. Since there is no central bank, the system is distributed and therefore not easily manipulated either by large institutions or by governments. This means there is little regulation and more freedom on who spends how much on what and where. This benefit is enhanced by the fact that there is less private information attached to each transaction. There are even cryptocurrencies whose main goal is to provide an untraceable, secure, and anonymous means of payment.
Chuck Reynolds
Contributor
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