With the rise of the cryptocurrencies, a complete new financial product has been created. For the first time ever we have currencies which can be used for payments, as well as for investments. In this article I wish to elaborate on why I see crypto's as hybrid and point out if this is a good or bad development.
There is an ongoin debate about whether crypto's are currencies or not. I think they are currencies, so pleaes take that statement in consideration while reading the article.
In the current ,traditional, monetairy system we are used to having our fiat-currency like Euro or Dollar. With these currencies we are able to buy anything we like; for example, groceries, a new smartphone or maybe a hybrid car; however, it can also be used as an investmenttool. The most common example is to buy stock from businesses and strive for growth if they increase in value or if they pay dividend. In the current system there is a hard line between money and stock. Money isn't stock and stock isn't money untill you sell.
The traditional system is slowly but surely changing and if you ask me, I would say it is evolving in a hybrid form of money and stock. Let's take Ethereum and Apple as an example.
If I want to buy Apple stock, I need to pay with fiat-currency and in return I receive x-amount of Apple stock. When the value increases I can sell it for more money in return, or I can keep it for the long run and earn dividend in the meantime; however, if I wish to start a company I can't pay with my Apple stock to fund it. I need to sell the stock and use the fiat-curency to fund my startup. This is where cryptocurrency steps in. If I bought Ethereum in stead of the Apple stock, I could do the following:
Keep the coins in my wallet and wait for an increase in value (stock);
Use the coins to buy goods; for exmple webshop Taobao accepts Ether as payment (money);
Use the coins to fund my startup (money);
When Ethereum switches to hybrid and full Proof of Stake I can use the coins to validate transactionss and earn fees (dividend).
I must admit that Ethereum is the most versatile token at the moment. It provides source code for developers and entrepeneurs to build their own company (ICO); however, most other crypto's are hybrid. Most of them offer functionalities on their platform which need to be paid for with the internal crypto. On the other hand; I can keep them in my wallet and let them function as stock, thus speculating on an increase of value.
There is no doubt about the transition that crypto's have started in the montairy system. Slowly but surely we are moving towards an economic system where cryptocurrencies are used for payments, investments, and functionalities. There are two outcomes possible in my opinion:
People only buy the crypto to keep it as stock and wait for the value to increase. In this scenario the platform might increase in value after the money inflow; however, if nobody uses the crypto for its actual goal on the platform, the platform will eventualy fall apart and make the crypto become worthless.
The crypto is initially used purely for internal functionality, thus increasing the intrinsic value of the company and the crypto. Once people notice this, investors will be attracted and start trading the crypto and therefore create more fluctuation in value. It is vital for the platform's survival that a good balance between investment and internal circulation is found. If not, the platform is doomed to plunge along with its value.
I thoroughly believe that both scenarios will take place the next few years. Is this a bad thing? No, it is not. In the current setting businesses are created and businesses go bankrupt, since they were not good enough. Once a platform has a good businessmodel and a community backing it, the company will florish and prevail, leading to maturisation of the crypto-market and price stabilisation. For the first time in my life I like a hybrid concept.