Monero: The Cryptocurrency King: The five key fundamentals that are likely to skyrocket Monero's value by 2024 by Jones Chris

Author:Jones, Chris [Jones, Chris]
Language: eng
Format: epub, mobi, azw3
Published: 2020-11-01T16:00:00+00:00

Fungibility and Monero

If you read any literature about Monero you’ll likely encounter the topic of fungibility quite a lot. Why does it matter so much to Monero and cryptocurrencies in general? There are also some myths floating around about what fungibility means for a currency. Does a currency being fungible prevent it from being lost?

For example, if someone lost their wallet, does Monero being fungible mean it can be recovered? Unfortunately, that is not what fungibility means. As you’ve already learned, fungibility only refers to the ease of exchange. You’ll still stand to lose your cryptocurrency if you happen to lose the keys to your wallet.

It does not relate to the ability to exchange one commodity for another. For example, if you can’t exchange Monero for Bitcoin, this doesn’t mean either one of them is infungible. Unlike many aspects of cryptocurrencies, fungibility isn’t something that can be fully engineered.

What I mean is that the creators of a currency can design the best protocols and establish a secure foundation. However, they cannot predict the ways in which a currency will be used. Let’s take Bitcoin for example. Right from the start, Bitcoin was designed to be fungible.

There were no forks or alternate code established that gave Bitcoins different values. Each coin was worth the same no matter where it came from or who mined it. However, the manner in which Bitcoin is used and its privacy characteristics might make it less fungible .

A key challenge for cryptos and for Bitcoin is gaining mainstream acceptance. As much as I’ve been criticizing big banks and governments thus far, they do present one very valid argument. A lot of cryptos are used for illegal transactions and this makes their daily usage problematic.

In order for cryptocurrencies to be readily accepted, they need to get rid of the air of illegal behavior that surrounds them. One way of doing this could be to designate rogue actors and to invalidate their holdings of cryptocurrency. This is what happens with paper money anyway.

If a drug dealer is busted by the cops, their assets are seized, and they forfeit all the cash they have. This bankrupts them and prevents that money from entering the system and changing the value of assets. Imagine if a drug dealer could suddenly buy property in posh areas of town with the money they made. The value of property would rise and ordinary citizens would be unable to access it.

This is why curbing illegal behavior is crucial. One can argue on what constitutes illegal behavior but there are certain actions that no person is okay with. Cryptocurrencies inadvertently have made it easy to track such behavior. The problem is that the frameworks to do this aren’t concrete and threaten their fungibility.

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