You may have come across the above meme that depicts Bitcoin or other cryptocurrencies as the next thing in the evolution of currencies.

The following article attempts to summarise this evolution of finance with short notes on what was the major reason for the change.

We have grouped the financial timeline into four Ages according to the change we wanted to focus on.
 

1. Age I: Barter System
   We start with the barter system in the begging where value was stored only in objects and services and there was no currency as such to quantify value separately. People exchanged goods and services directly without any intermediate.
    
2. Age II: Coins, Gold & Gems System
   The barter system got replaced with coins.
   Coins had the huge benefit of providing quantification but at the same time, they would centralize the monetary power. When a new king defeated the existing one, the former would devalue the old coin by printing the new coins in their own name.
   
   This started causing issues for the masses who eventually started storing a portion of their value in precious items like gold, silver & gems.
   
    
3. Age III: Morden Fiat Currency System
   With the rise of nations, we shifted from coins to paper currency which was initially backed by valuables like gold. However, nations soon realized that currencies had such a strong correlation with the economy that they could directly be run on the principle of Economy:
   “Price of anything is controlled by its Deman and Supply”
   Hence, most modern currencies (Fiats) aren’t backed by physical objects like gold.
    
4. Age IV: CBDCs & Cryptos
   The Future is Digitization. The world is looking to get more and more digitized. Asian countries have already experimented with digital transactions and have a huge adoption of digital payments. The United States which is the largest economy plans on increasing digital payment adoption with the launch of Feds Now (an instant payment system).
   
   But this is not where digitization stops. The issue that currencies still have a digital form has a few drawbacks. A lot of resources go into printing and moving the currencies each year. Besides, since physical transactions are non-trackable it leads to a lot of unaccounted transactions on which the government can’t collect taxes.
   
   The solution as many of us know is that most governments have been working on a plan to develop a completely digital currency called CBDC.
   
   For reference, you can read RBI’s Note on CBDC here.
   
   It's expected that most of the large economies will have rolled out CBDCs by 2025 - 2027 and a good portion of the currency for each government will be only in digital form.
   
   While CBDCs will be easier, faster, cheaper, more scalable, and more programable it will increase the centralization of currency. This according to some is too much concentration of power.
   
   While the world is evolving to a more centralized digital self with CBDCs there is a parallel progress for building a decentralized digital world with cryptocurrencies.
   
   Cryptocurrencies are a less centralized store of value that is not in control of a single institution. Their vision is public on a whitepaper, their roadmap is voted by DAO and the discussion on what it actually stands for is openly discussed on social forums by the community that cheers it.
    

While people from the two different ends of the spectrum will argue for a future with either of these (CBDC & Cryptocurrencies), the current progress suggests a probable future where the two of them exist simultaneously.

We at Next Tales do believe that an extreme scenario of a world with just CBDCs or just Cryptos sounds like an episode for ‘Black Mirror or Twilight Zone’ and the two existing simultaneously will counter each other's drawback.

So stay tuned for more content from us where we will talk about the value addition and drawbacks of these and more.