Cryptocurrency is primarily a type of financial asset. Therefore, it is important to understand its nature and the properties that it has. Let’s take a look at what hard cryptocurrencies are? Do such concepts even exist?

General concept of asset hardness

 

The concept of hard currencies exists not only in the cryptocurrency industry. And it originally appeared long before the invention of digital assets. Any currencies, assets and minerals can be hard. The hard asset phenomenon means that an asset has an annual inflow of less than the total reserve.

In simple words, that currency or resource is considered to be hard, in which fewer new units of calculation are added in 1 year than there are at the moment.

For example, if conditionally there is 1 ton of gold in the world and for each year the amount of new gold mined is less than 1 ton, then it is solid.

What are hard cryptocurrencies?

 

With cryptocurrencies, the situation is absolutely similar. Those cryptocurrencies that have, firstly, their limited emission, and secondly, fixed mining, are calculated in the program code, are considered solid.

The reference example of a hard currency before the advent of cryptocurrencies was gold. You can’t get too much of it, you can’t make it chemically. In general, its inflow will be approximately the same every year. And it will be much less than the available reserve. However, gold is not perfect, as it does not have a clear boundary when it can run out.

An ideal example of a hard cryptocurrency is bitcoin. He has a limited issue – 21,000,000 pieces. A clear and verified emission, which is written in its program code. This means that even if you really want to, it is simply unrealistic to print more and lower the value of the asset.

What are hard cryptocurrencies: what are the nuances?

 

The concept of “hardness” of a currency is ambiguous. Many economists invest in this concept not only the fact that the annual inflow exceeds the reserve, but also the absence of volatility, when the exchange rate is not inclined to decrease, it is stable. And also such assets should have high purchasing power.

In terms of high purchasing power, Bitcoin and other cryptocurrencies are doing just fine. Now many digital assets are extremely popular and in demand. However, they cannot yet be called “solid” in full, since they are extremely volatile. And the bitcoin rate cannot but be prone, for example, to temporary falls.

That is why most of the cryptocurrencies can still be classified as “soft” currencies. And what are soft currencies, we will analyze in the next article.