The key idea behind the so-called parallel digital economy was its interoperability with the traditional financial system. The concept was logical, considering the fact that the money flowing into the digital economy was actually fiat, which was compiled on the wallets of issuers of digital currencies, who, in turn, gave out digital tokens and coins in return to the users. Needless to say, many experts regarded the given scheme as nothing short of fraud, and with good reason. The idea of taking money from people and giving them digital tokens of no intrinsic or practical worth is akin to fraud, especially considering the fact that said tokens were subject to far more than just volatility, speculation and any number of external factors.
The digital economy was actually run by fiat. Even a fleeting look at the amounts of money operated by exchanges, funds, and even some projects, is enough to realize that the money of the users was well kept in fiat on the accounts of said projects’ founders. The counterparts released into the digital space had no worth at all and were more of a smokescreen to provide a semblance of activity, intrinsic value, utility or practical worth. In general, the coins and tokens that users had bought for cash were nothing more than air that could only be traded for another form of air or some seemingly useful service in the digital space.
To make the process of money siphoning and cash hovering from the wallets of believers in the digital economy of the future even easier, the founders of many exchanges and digital platforms started connecting major gateway providers like Visa. With the gateways connected, users could now buy Bitcoin using their credit card and enjoy the fact that they managed to receive their piece of the digital economy. With credit cards connected, the exchanges could receive a near endless flow of funds from traders and retain investors, offering leverage of up to a thousand percent, worrying not a bit about the catastrophic consequences their users would face in case of an asset price crash or unlucky trading streak.
The scheme of attracting fiat into the digital economy actually did work for many years very successfully. It was so successful that it produced such outstanding examples of great renown as USDC, FTX, Terra/Luna and many others, all of which crashed and burned mercilessly, leaving their users threadbare. And what of the founders of such catastrophic corruption schemes as FTX? They managed to get away with their crimes by paying bail in the millions of dollars from their wallets. More surprising was the fact that no one ever questioned the presence of such colossal amounts of money on their accounts in the first place.
But the users themselves are most to blame for all of their woes. The logic is actually very simple, since they were gullible enough to believe the promises and visions of an outright bunch of fraudsters who were in pursuit of their own profits by riding the way of a new technology’s hype. It is ridiculous to even conceive that a parallel economy can exist in a world dominated by centralized systems and overnight authorities. But it would be interesting to delve a bit deeper into the inner workings of the integration of the two economies.
Buying cryptocurrencies using fiat via debit or credit card has long become the norm. It is known that many of the exchanges that first emerged on the eve of the blockchain economy’s emergence rushed to connect the two most popular gateways – Visa and MasterCard. The reason was very simple, since those in charge of the development of blockchain projects realized perfectly that their services, tokens and coins were worthless, but a huge mass of users were duped into believing that such a new development could actually grow into something worthwhile and could yield profits.
Considering that said mass of users was ready and willing to shell out their last pennies in exchange for a few coveted tokens, the founders were eager to find ways of connecting the main gateways, realizing that only fiat would ever be worth anything and would always exist. The loud statements that fiat was done for and that digital cash would prevail in the battle for the hearts and minds of digital economy users were nothing but pretense and playing along with the current narrative. The ultimate beneficiaries were the founders, as they hoarded the fiat of their users and got away with it into the sunset, leaving the believers in cryptocurrencies to their own devices.
Needless to say, the governments of many states were well aware of the fraud and were taking action to stem its tide, but proved to be powerless, since the population was unwilling to accept that such an advertised and hyped up phenomenon as blockchain was nothing but a fad and a form of enrichment for a group of fraudsters. Faced with opposition from the public, which was willing to be duped deliberately, the governments decided to play along and released their own versions of the digital currencies so many were clamoring for.
The cryptocurrency industry is not going anywhere, it will remain, facing cycles of bearish and bullish dynamics, living through volatility. The number of users will grow, but due to the hype factor as before, but due to the fact that more regulated forces will be entering the market and developing solutions capable of providing actual usage without having to overpay for them. The governments of some leading nations will be leading said charge, cleansing the blockchain market of the fraudsters, taking their place as the sole regulators and overseers of the so-called digital economy.