During the stature of the monetary emergency in 2009, a secret character by the name of Satoshi Nakamoto concocted Bitcoin and made it accessible to the general population interestingly to buy crypto. Fast forward 12 years and this asset has drastically disturbed our financial system, with a market valuation of roughly $800 billion. Yet, precisely, what are Bitcoin and digital currency? What is the fate of this game-evolving resource? Will it put an end to fiat money as we know it?
What is Digital Currency?
To begin with, cryptocurrency and Bitcoin are digital currencies that exist exclusively online. Because these currencies are produced by a network of individuals, no single person or organization has authority over their creation. Mining is a procedure used by those who create cryptocurrency (which may be anyone). This procedure involves utilizing a computer to tackle a computationally difficult problem. Once these issues are resolved, a new block (a record of when certain transactions occurred on specific dates) is added to the blockchain (the entire record of all transactions). The miner is compensated with a fixed quantity of coins in return for validating and adding transactional information to the blockchain.
Significance of Digital Currency
Cryptocurrencies are crucial because they allow for the existence of money that is not controlled by anybody. This is a good thing because the sheer amount of power that banks have amassed as a result of their currency monopoly has resulted in several cases of abuse and incompetence, including the 2008 financial crisis, an increase in the frequency of war by making war funding easy, and a massive devaluation of the currency. Prior to the introduction of a central bank in 1913, the dollar only grew by 0.4 percent every year. This figure, notwithstanding, has moved to 3.5 percent since the arrangement of the national bank!
Digital Currency And Economy
Anyway, what is the job of cryptographic forms of money in our monetary framework later on? Will it liberate us from banks and replace fiat currency (currency backed by the government’s guarantee) as we know it? In a nutshell, yes and no. To begin with, the United States government will never accept a decentralized currency as its official means of payment. This is because the government would not want to relinquish its control over money production since it would not be in its best interests to do so. The governments will want to control the cryptocurrency purchase to maintain their hold on the future economy. When you have the power to just create additional money, you can do a lot more like a government. Furthermore, the government would suffer if it adopted a deflationary currency such as bitcoin. In a world where the value of cash rises year after year, the value of what you owe rises as well. This makes paying off the debt more difficult and expensive, to the point where it’s impossible. This would bring the country to its knees and create a situation in which no government could ever borrow money again. While this may seem nice to people who want our government to be fiscally responsible, it is ultimately terrible since history teaches that sometimes a crisis develops that demands the government to borrow money.
The government, on the other hand, will establish a centralized cryptocurrency under their control. This currency’s value will be linked to the value of the national currency, and it will be used to distribute stimulus cheques, move monies to and from government entities, and support any government initiative. Because the history of this currency will be thoroughly documented on the blockchain, there will be less corruption and taxpayers would have greater information about how their money is being spent.
Crypto will reduce corruption and make the distribution and transfer of monies in government more transparent and efficient. It will also save the global economy tens of billions of dollars in remittance fees, tens of trillions of dollars in currency exchange fees, hundreds of billions of dollars in fraud costs, accelerate the socioeconomic development of second and third world countries, increase the returns and decrease the costs associated with financial services, reduce the size of banks, and serve as the greatest inflation-resistant store of value ever invented.