The aim of cryptocurrency is to replace the existing financial system, which includes replacing money with bitcoin and payment rails with ethereum and other cryptocurrencies. However, there is still a need for a cryptocurrency that can be used for day-to-day transactions. Stablecoins are attempting to fill this role, but most are centralized and vulnerable. Payment cryptocurrencies like litecoin also have limitations due to scalability issues. The perfect cryptocurrency for daily transactions should have an equitable initial distribution of the coin or token, a robust consensus mechanism, and the ability to process transactions accurately and securely.
What Characteristics Should the Perfect Cryptocurrency Have?
The purpose of cryptocurrency is to replace the existing financial system by replacing the money and payment rails. However, this also means replacing the day-to-day transactional currency, and the quest for the crypto that is actually a currency continues. In this article, we will discuss the characteristics that the crypto used as currency should have.
Equitable Initial Distribution
The perfect cryptocurrency should have an equitable initial distribution of the coin or token. It should avoid conducting an ICO, as it leads to regulatory scrutiny and inequitable distribution. It leaves two other options for initial token distribution; a fair launch or an airdrop.
Robust Consensus Mechanism
The perfect cryptocurrency should have a robust consensus mechanism that is resistant to corruption by investors or governments. While proof of stake is easier to corrupt, proof of work is more secure but can become inaccessible to the average person. Therefore, a novel version of proof of work that is accessible to everyone would be ideal.
Fast transaction speed would be another characteristic of the perfect cryptocurrency. Payment cryptocurrencies like Litecoin have limitations that prevent them from being adopted as actual payment methods, namely scalability.
The perfect cryptocurrency should be decentralized. Stable coins that are centralized go against the ethos of cryptocurrency, and decentralized stable coins have their own limitations. The cryptocurrency should prevent a single entity from controlling the majority of the initial supply.
Crypto governance is another characteristic of the perfect cryptocurrency. The community should be able to decide how to spend a portion of all block rewards and or transaction fees. Decentralized identity mechanisms should accompany crypto governance to prevent a single entity from controlling multiple wallets.
The perfect cryptocurrency should have an equitable initial distribution, a robust consensus mechanism, scalability, decentralization, and crypto governance. While this cryptocurrency does not yet exist, it is an idealistic look at what the future of cryptocurrency could look like.