Tim Draper: Cryptocurrencies to Replace the Fiat System in Five Years

Venture capital investor Tim Draper claims that in five years there will be no reason to use fiat currencies as cryptocurrencies will replace them.

Speaking to Forbes at a WebSummit conference, Draper said:

In five years, if you try to use fiat currency they will laugh at you. Bitcoin and other cryptocurriences will be so relevant … there will be no reason to have the fiat currencies.

Draper, founder of Draper Fisher Jurvetson (DFJ), an American venture capital firm, has led investments in Twitter, Skype and Tesla. Seeing the value in cryptocurrencies, in particular bitcoin, the investor purchased 30,000 bitcoins during the government auction of assets seized from online darknet Silk Road in 2014. At the time, the coins were worth under $20 million. Now, those same coins are valued at $215 million.

Bitcoin remains the number one digital currency on the market and is leaps and bounds ahead of second-placed ethereum. According to CoinMarketCap, it is currently trading at over $7,700 with a market value worth $128.4 billion. The combined cryptocurrency market is valued at $209.5 billion. Yet, while it is a fraction of the $2 trillion fiat system, bitcoin’s value is continuing to rise.

Not only that, but according to Draper, digital currencies are reliable stores of value compared to fiat currencies. He claims this by pointing out that fiat currencies are bound by country borders. For example, Nigeria’s Naira drops 30 percent in value outside the country’s border. On the other hand, cryptocurrencies retain their value better.

Draper adds that eventually all fiat currencies will disappear as digital currencies become a viable alternative as stores of value and transfer agents.

Despite the fact that there are hundreds of different cryptocurrencies on the market, Draper doesn’t think that this makes a difference.

They’re all going to interrelate … and there will be exchange rates for all of them. My guess is that it will centralize around a wallet that you have, and when you pay for that Starbucks, your wallet will optimize to whichever currency has most value.

In theory it sounds simple, but putting it into practice may be another matter. Draper, however, remains optimistic about the future of the market.

If it doesn’t get simplified it won’t get adopted … good marketing people will simplify all use of these things.

He adds that even if there is a johncoin or a timcoin they will be traded in realtime as people put more value into what they stand for.