When we discuss the potential future usefulness of cryptocurrency, we compare against existing use-cases of fiat currency. Given a particular fiat currency -- its name, its unit, and its exchange rate -- our language enforces us to think of it as one currency.
This is a misconception that will lead to poorly designed alternatives with strong, but unaligned monetary properties at the wrong time. If we don't think of a fiat currency as many currencies within one brand, then any attempt to re-model those use-cases with cryptocurrencies will come short of being practically useful.
The classic shapes of fiat currencies are:
- Physical cash money
- Credit card money
- Bank loan money
- Company money
- Point system money
- New digital cash money
The reason why thinking of these as separate currencies within the same brand is that they do not have the same monetary properties, or even the same purposes, at all. And if you consider the cost of exchanging one shape for another as part of the exchange rate, they don't even share that.
When Bitcoin were still getting popular, the following six historic monetary properties were used to justify being "real money":
- Scarcity (has limited supply)
- Durability (doesn't break)
- Acceptability (can pay with)
- Portability (can carry)
- Divisibility (can buy big/small things)
- Fungibility (all coins are the same)
Now cryptocurrencies are immensely popular, but still mostly useless. While these monetary properties have gradually become true for money historically, cryptocurrencies generally lack some of them; in particular, mainstream acceptability and practical durability (recover lost funds).
We could write that off as work in progress. But why bother changing currencies if all you get is the same, but with fewer consumer guarantees (e.g. conditional transaction reversibility) and a worse user experience?
Perhaps, like not all historic money had all desirable monetary properties in the same degree, or at all, the newer monetary properties of cryptocurrencies have yet to be understood and valued because they still fail basic usability.