Although I don't own any, I find crypto-currencies to be a really interesting concept. The world desperately needs an alternative to the shortcomings of venal central bankers and their unstable fiat currencies.
Then a thought crossed my mind. What would my personal requirements for the perfect crypto-currency be? What would make a crypto-currency good enough to challenge and possibly displace traditional government-issued money?
According to the Antique Sage, the perfect crypto-currency must be:
1) SECURE
There must be every assurance that the blockchain cannot be corrupted or manipulated in order to steal, divert, destroy, double spend or counterfeit the crypto-currency. This basic requirement for a successful digital currency has largely been solved, albeit not without a few growing pains along the way.
All the large cryptos, including Bitcoin (BTC), Ethereum (ETC) and Ripple (XRP), along with most of the smaller ones, are quite secure today.
2) NON-INFLATIONARY
The terminal growth rate of the crypto money supply must be under 1% per annum. This is to avoid the situation that exists with fiat currencies today, where central banks are free to issue currency in unlimited quantities to their banking buddies and the politically-connected (as happened during the 2008 financial crisis).
This is another problem that the crypto-community has largely solved. Bitcoin, for example, will famously cap-out with a total of 21 million tokens. After 21 million Bitcoin have been mined (most likely sometime in the 22nd century), the terminal growth rate of the currency will drop to zero. No more Bitcoin will ever be created after this point.
Most other crypto-currencies have followed their progenitor's lead. For instance, Litecoin (LTC) will top-out at 84 million coins, while Cardano (ADA) has a maximum potential supply of 45 billion. However, a few have chosen to allow infinite (but controlled) monetary expansion, like Monero (XMR) and Ethereum. I believe this option is completely acceptable, provided the terminal inflation rate remains below 1%.
3) PRIVATE
Transactions must be truly anonymous with no possibility of corporate big data or governments using the blockchain to infer holdings, transaction participants or buying patterns. Absolute crypto-privacy is still a work in progress, but a few pioneering crypto-currencies have taken up the challenge.
Foremost among these is Monero, in which all transaction data is completely private. A couple other crypto-currencies - Zcash (ZEC) and Dash (DASH) - share some privacy attributes, although not quite to the same extent as Monero.
4) INEXPENSIVE (TO TRANSACT)
It must cost less than 10 cents to process a transaction. This would allow micro-transactions of just a couple dollars to be viable - an absolute requirement for any crypto-currency that wants to become truly mainstream. It would also help the crypto in question to displace credit card transactions, where the VISA/MasterCard duopoly often charges 2% to 4% in fees, plus additional fees if foreign currency exchange is involved.
Many different crypto-ecosystems have already achieved this precondition for a commercially-successful digital currency. According to this March 2018 article by The Motley Fool, Tron (TRX), Ripple, EOS (EOS) and Bitcoin Cash (BCH) all had transaction fees of less than $0.01.
5) FAST (TO TRANSACT)
The perfect crypto-currency must be able to process substantially all transactions in 5 seconds or less. This would allow it to be used with confidence for internet purchases or international commerce. Right now Nano (NANO), Stellar (XLM) and Steem (STEEM) meet this stringent criteria, while Ripple gets close with a transaction time of around 10 seconds.
However, I do believe it is important to note that transaction speed (how long it takes to process a transaction) is a separate issue from scalability (the number of transactions a crypto-network can process at peak load). It is absolutely possible for a crypto to be very fast when its network is lightly loaded, but slow to a snail's pace when transaction volume picks up. Of course, the perfect crypto-currency would complete every transaction very quickly, regardless of network loads.
6) SCALABLE
It must be able to process 50,000 to 100,000 transactions per second. If any crypto-currency ever hopes to displace our antiquated 20th century payment system, it has to be capable of significantly beating VISA's 24,000 transactions per second.
I predicate this on the idea that a mainstream digital currency would have very strong worldwide demand, with a user base of anywhere from hundreds of millions to billions of individuals. Murphy's Law dictates that at some point in the future, everyone will try to buy their morning coffee with their crypto at exactly the same time. Therefore, being able to outperform VISA's current network throughput is a necessity.
Although no crypto-currency clears this significant technical hurdle yet, Ripple gets an honorable mention with its capacity to process approximately 1500 transactions per second. I suspect new technological refinements will propel us past this benchmark in the next decade or two.
7) ENERGY EFFICIENT
The blockchain (or equivalent technology) used to process transactions must use as little energy as possible. While it was initially an afterthought in the crypto-space, energy efficiency has gained increasing attention with the revelation that Bitcoin mining alone uses a staggering 73 TWh of energy per annum - the same amount of electricity used by the entire country of Austria. As if that wasn't enough, the British newspaper The Guardian recently released an article that claims Bitcoin mining consumes more energy than the copper, gold and platinum mining industries combined!
It stands to reason that it is unwise to waste electricity if we don't need to, particularly on such a grand scale. Therefore, having our perfect crypto-currency's blockchain be as energy efficient as possible is a reasonable requirement. In addition, I think it is vital to save our computing energy for the next item on the list.
8) A STORE OF VALUE
Processing the blockchain should not only tally up transactions, but also create computationally-expensive intellectual property that is of broad use to mankind. This could take the form of medical simulations, geologic mapping, astrophysics calculations or climate modeling, to name just a few possibilities. In addition, immediately after its creation via the blockchain mining process, this intellectual property must enter the public domain where it can be freely leveraged by any corporation, individual or non-profit group who wishes to use it.
This requirement is by far the most technically challenging of the 8 that I have listed. However, cracking it will endow the winning crypto with the Holy Grail for all digital currencies - intrinsic value. This would remove the last great disadvantage inherent in crypto-currencies - their ephemeral, purely-digital nature - and allow them to compete head-on with more traditional stores of value such as precious metals.
If you are interesting in reading more about this tantalizing possibility, I touched on it in an article titled "Blockchain 3.0 and the Problem with Bitcoin".
Conclusion
So far I believe that the crypto-community has definitively solved my first two requirements (security and a low inflation rate). I think the next three (privacy, low transaction cost and quick transactions) are in the process of being solved. Scalability and energy efficiency, in contrast, are proving to be difficult hurdles. And the final requirement for my perfect crypto-currency - that it be a store of value - is still just a fevered dream.
Perhaps even more importantly, all of these desirable attributes must be rolled up into a single crypto-currency before it can truly be competitive with existing fiat currencies. In my opinion, we have a ways to go yet in crypto-land.
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