There is such a term as ‘perfect money’, which relates to an economic concept revolving around the theory of money. The latter states that money is a means of exchange that allows its holders to store value, both perceived and intrinsic, and transfer that value to other users in exchange for commodities of equal or greater value. Such money has to be divisible, universally acceptable, portable, relatively scarce, highly durable, and stable in value to remain acceptable universally. These characteristics cannot be translated to such assets as cryptocurrencies, meaning that Bitcoin and other digital assets cannot be construed as perfect money.
However, the existing versions of money, such as fiat, cannot compete for the title of being perfect either, since they do not possess some of the characteristics of blockchain-based assets, such as immutability, transparency and high security. This means that users of fiat have to contend with some problems just like their cryptocurrency-using counterparts. It is impossible to seamlessly withdraw perfect money in digital form. The reason is because perfect money does not exist. The fact that cryptocurrencies are highly volatile rids them of that title of perfection, while fiat funds are not universally acceptable, and neither are cryptocurrencies.
In order for a transaction to be performed, intermediaries are always necessary. This factor is present for both fiat and digital currencies. The latter are characterized by the use of the blockchain, which still needs miners and node operators to function. These agents are also intermediaries in the chain, since they will have to hash transactions for a fee in order to conclude transactions between other users. Banks and other types of market agents are also intermediaries for the traditional fiat monetary system. In essence, it is possible to say that there is no such thing as perfect money, no matter what the creators of Bitcoin or any other cryptocurrency stated.
Perfect Money in Nigeria
There have been attempts to create perfect money in Nigeria as well. The concept revolved around endowing traditional fiat funds with the characteristics of the blockchain. The ability to send money using the blockchain to take advantage of its main characteristics was the biggest selling point, while the use of the central bank and its services as a trusted money agent would have endowed the new asset with the core characteristics of traditional fiat.
The result was the deployment of a new type of digital asset in the country – the eNaira. The new digital currency was dubbed a CBDC, or Central Bank Decentralized Currency – a new and fashionable term used for the currencies released by states as digital counterparts to other types of cryptocurrencies. CBDCs are supposed to leverage the value stability of traditional fiat and the transparency of the blockchain to ensure complete control over monetary flows inside the country. Users will be able to accept such assets and make transactions with them. A key selling point was that any card could be used to accept CBDCs.
Key Takeaways
Money is a very special asset used in human relations. Much like a universal or common language, money acts as a means of transferring and showcasing the value of certain commodities. Anything can have a price tag attached to it, but that tag has to translate value, which is understandable and valued by other users and those willing to buy. Much like fiat and the ensuing development of the United States Dollar as a global reserve currency, the CBDC emerged on the wave of hype spawned by the advent of the blockchain and the cryptocurrency industry. However, unlike the uncontrolled emission of the US Dollar, the CBDC was supposed to act as a blockchain-based asset that could leverage the technological advantages of the network for the benefit of the state.
