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By Analía Cervini, VP of Communications at Bitso
How could crypto be used the same way as money? What gives it value?
These questions confound the crypto-curious. Lines of code gaining and losing value, being traded online and used to purchase anything from pizzas to sports passes can be difficult for most people to wrap their heads around. As the World Cup approaches, however, it presents us with a timely metaphor that sheds light on the question of where crypto gets its value. Soccer fans will understand:
Every year, when it comes time for the World Cup, fans from around the world buy sticker books full of their favorite players’ headshots and spend weeks trading those stickers to curate the perfect collection. This year, Jen buys her World Cup sticker album and begins to make trades. She has numerous repeats that she knows others would appreciate, so she exchanges them with other fans. Because some of the stickers in her collection are highly valued, she exchanges one of them for two or even three from another less in-demand collection. In fact, her friend Jeremy offers to pay for her lunch in exchange for some that he’s missing and her friend Chad offers to buy her sticker of the star US player for $5.
There are hundreds of millions of people in the world trading stickers, so much so that Jeremy was willing to exchange a lunch for one, and Jen is convinced that they have a value beyond what she paid. However, Jen can’t go to a coffee shop and buy a coffee with these stickers because the coffee shop wants money in exchange for the coffee. It seems absurd to her because the cafeteria would be getting something that millions of people around the world use as currency.
Jen can explain to the cafeteria that the stickers don’t suffer from inflation, that their value is the same throughout the world, and that they are not subject to the decisions of governments or central banks. But the argument is useless. The cafeteria knows that it must absorb its costs and pay its suppliers with money. Meanwhile, Jen continues to participate in the immense and growing sticker trading community across the world.
Stickers for stickers. There are billions of stickers circulating in the world and there are millions of people assigning value to them, but establishments don’t want stickers unless their suppliers can be paid with them as well.
In the face of the imminent gap between those who value stickers and those who give value to money, certain companies can emerge to bridge both worlds, understanding the value that the stickers have for Jen and the value that money has for the cafeteria. Thus, a company offers to give Brooke stickers in exchange for her money and to give Jen money in exchange for her stickers, based on each of their needs. Now, these companies can evolve and go much further in bridging these two mediums of exchange. They can make it possible for Jen to pay the cafeteria with stickers while the cafeteria receives money.
In this metaphor, the stickers are cryptocurrency. People from around the world start purchasing them for one reason or another – at first because they like the concept itself, then later because they’ve heard of it from their friends. Much like the limited number of stickers featuring the best players, when people learn that the supply of cryptocurrencies like Bitcoin is finite, they become interested in their rarity – willing to pay more to own some. Soon, people aren’t just buying them because they’re interesting or because their friends showed them; others start making the same purchases because cryptocurrencies are valuable in and of themselves.
Of course, with World Cup stickers the time will come when everyone completes their collection and no one wants to exchange them anymore. Crypto, on the other hand, doesn’t follow sports seasons – its value proposition remains steadfast. There’s nothing to stop people from being interested in this new technology for sending money across borders, hedging against inflation, or transacting with new levels of transparency. Without an expiration date, companies pop up to help businesses like the cafeteria convert crypto to traditional money and vice versa – today, those companies are called exchanges.
Living with crypto in this way is already a reality in some countries around the world; in Mexico, crypto has become key for sending funds to and from the US; in Argentina, many people pay with crypto by scanning QR codes; and across the world, some of the most well-known brands have begun accepting crypto as payment. The stickers may only last a season, but crypto is here to stay.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Image and article originally from www.nasdaq.com. Read the original article here.