DoomYoshi wrote:Two biggest problems with cryptocurrency:
1) they are a type of fiat currency;
Most modern currencies these days are fiat. The problem with fiat currency has nothing to do with fixed value and everything to do with fixed issue. Now there used to be two types of gold certificates allocated (non-fungible) or unallocated (fungible or pooled). "Unallocated gold certificates are a form of fractional-reserve banking and do not guarantee an equal exchange for metal in the event of a run on the issuing bank's gold on deposit." In other words you are allowed to print more certificates than you have gold backing those certificates.
Modern currencies are actually worse than fiat because they are virtual. Most of the currency isn't in bills here and there or sitting in a vault, but a number in some computer. (Some computer that is prone to hacking.) The money supply can expand drastically through financial transactions in the electronic system.
In principle, cryptocurrency is slowly growing currency (the supply is increased for every unit "mined" by the system). In theory this is supposed to be a good thing, although a real fixed currency is far better. The problem is that if the supply is really "fixed" or relatively fixed you will always see a "big bang" as demand explodes from zero to some number. That's what we are seeing at the moment; Bitcoin is acting like a penny stock in that it's value is simply based on how many people are trying to push the product on the market; artificial demand based on hype results in increased value.
The real value of cryptocurrency is the nature of the encryption. Consider your typical bank account. Hack into the super user and you have access to all the accounts under that system maintained by the super user. But with cryptocurrencies, there are no "super users." Hack into a user and all you have is one user.
So let's recap. Cryptocurrency is massively distributed, personally encrypted, data used for financial transactions. (As opposed to centrally distributed, system encrypted, data which is your bank account.) But that "data" doesn't have to be financial. The future of this technology will probably go beyond financial wealth and into all sorts of data that people want secure and secret; company secrets, personal data, and so forth.