Cryptocurrencies and inflationary systems: A real and immediate solution.

May 13, 2019, 11:15 p.m.
Cryptocurrencies in inflationary systems: A real and immediate solution.

Fiat currency is a set of coins and bills that are used as a means of payment, issued and controlled by a central bank, and therefore susceptible to its policies. Countries such Venezuela (+ 10,000,000% inflation), Argentina (54.7%), Angola (21.6%), Nigeria (12.5%), Turkey (19.7%) and at least a dozen more, have inflations of two digits or more. It´s more than evident that the stability of Fiat money is relative.


In these cases, those who suffer the most are the people that living in these countries, who are victims of price increases, job insecurity, low purchasing power and high levels of migration. That is why the development of new financial technologies have become increasingly determinant every day.


Cryptocurrencies are one of those developments. Beyond being a payment method person to person, without intermediaries, are a real and immediate solution to this situation, giving people the possibility of protecting themselves of ravages of financial crises.


There is much talk about cryptocurrencies in terms of investment issues, however, the usability of digital currencies is becoming more daily. These are the solutions that crypto's offer in inflationary systems:



cryptocurrencies for remittances


Migration due to economic and humanitarian crises results in the remittances sending. That's money that migrants send to their relatives or loved ones left in the countries of origin, as a result of their work in the destination countries. In general, remittances are sent through local agents and with currencies that have global stability (dollar, Euro), however, the process of sending remittances is complicated, costly and delayed. Sending a remittance can take three days and cost up to 20% of the total amount, so the migrant pays more than he sends.


In a humanitarian crisis, people search for immediacy, and this is what cryptos do. In most countries, the most recognized cryptocurrencies such as Bitcoin, Litecoin, and Dash are legal, and in some, they are already accepted as a means of payment in establishments and companies. In almost all the countries of the world, there are exchange agents or exchanges that exchange cryptocurrencies for the local Fiat currency. The sending of remittances with cryptocurrencies is practically immediate and the cost of the commission is considerably lower than the traditional remittance so that the relatives of the migrants can dispose of the funds instantly. Cryptos give the immediacy that the Fiat coins, in international processes, cannot give.



cryptocurrencies for professional payments


In these countries, those who are most affected are the workers, because they still move the productivity of their countries without being able to have a quality life that rewards their effort. In some countries, it´s more expensive to go to work than stay at home, and because of that many professionals required to work for foreign companies. Cryptocurrencies offer a real solution because the payment is immediate, and the worker or the contracting company doesn´t have to deal with bureaucratic setbacks and a lot of money in commissions.



cryptocurrencies for value reserves


In these countries, people are forced to protect their assets, due to the devaluation of local Fiat currencies, the price increase disproportionate to wages and the lack of financial stability. Cryptocurrencies offer a reserve of value since their volatility in these cases is not greater than the process of loss of value of local currencies. The use of other resources, such as other Fiat currencies, mineral resources, real estate, can put personal risk to the owner and also fluctuate. One of the crypto advantages is they are valued in stable Fiat currencies so the volatility of the cryptos could be in favor of people if they know how to operate with them.



cryptocurrencies as payment method


A determining factor in countries with inflationary systems is the decrease in the purchasing power of people living in the country, so another important affected is the commercial system. In many of these countries, the bank system collapses, without being able to keep up with the devaluation movement. In many shops, cryptocurrencies are already accepted as a means of payment of goods and services, offering businesses the possibility to market directly with the client, without intermediaries, immediately and safely. The handling of foreign Fiat currencies or precious metals for payments can be dangerous for the client and for the trade, for which the cryptocurrencies give extra security, due to their digital character.


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