Bitcoin as a technology has always attracted its fair share of attention. Despite diverse notions held about the technology, it’s always remained what it truly is: a decentralized digital currency that allows for financial transactions without intermediaries. To date, Bitcoin’s wide adoption has mainly been because it’s seen as an investment asset. Its beneficial uses as a currency have yet to be well put to use.
Compared to the existing fiat-based financial ecosystem, Bitcoin has a lot to offer as a medium of exchange. This article will list some of the reasons why Bitcoin serves as the best currency for everyone.
When it comes to money, perhaps the most startling realization is that money itself is not useful, it only serves a purpose within a social contract. Money only has value when there is someone who is ready to accept it as valuable. To explain this, imagine if the richest man was rocketed to another planet alone with billions worth of paper cash. He would be as poor as someone with nothing here on Earth, because the rich person doesn’t have anyone to accept the money he has in exchange for something on the new planet. This is in contrast to Bitcoin which is a borderless means of exchange. In a financial ecosystem that is largely cashless, there are always people ready to accept Bitcoin for a service or for goods, anywhere in the world.
All of the 5 billion people connected to the Internet around the world can set up a Bitcoin wallet and accept bitcoin and verify their transactions in real time without being inhibited by physical or political boundaries. Unlike most fintech applications that don’t have a presence in every country around the world, Bitcoin transcends all borders. Bitcoin bridges the chasms of national territories, different languages, and the use of different currencies that have been established throughout the world. In addition, international transfer with fiat is largely fragmented, resulting in higher fees and complicated processes to set up payments. Bitcoin simplifies this. In an economy becoming all the more digitized, every business can benefit from integrating Bitcoin and accepting payments and more and more businesses are realizing this. Just as how the wheel made travel easier and the Internet made the globe smaller, Bitcoin as a medium of exchange makes global payments simpler.
Henry Ford, “It is enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”. As a famous industrialist and one of the wealthiest men in the world, Ford understood a lot about the world and his remarks reflect an informed perspective. Why would he make such remarks that are seemingly outrageous? One would wonder why there hasn’t been a revolution yet. The truth is that much of the information surrounding how fiat-based financial systems work is enshrouded in a mesh of jargon that may make it uninteresting to the person who doesn’t have a deep understanding of economics. Either way, what Ford tried to infer isn’t any secret knowledge someone who’s curious cannot discover for themselves. So what about banks and the monetary system that could lead to a revolution? The covered-up fact is that the monetary system allows banks to create and own all the money in circulation and profit off the work of everyone else through loans; all while creating the illusion that the customers actually own the money. The fancier term for this monetary system is the fractional reserve banking system.
With this system, any money kept at the bank is never yours and is possessed by the banks to be given out as loans. Banks do not have every single dollar given to it by their customers. In fact, if a small percentage of customers would request their deposits, banks will fall into a cash crisis. With this debt-based system, banks lend out customers’ deposits based on the faith that not all customers will at one point in time withdraw all their money. By doing this, they essentially create a pyramid-like system where they can lend and profit from money that isn’t theirs. Since banks make money when they create loans, they become incentivized to create more debt in order to profit even more. This serves to allow banks to increase the amount of capital in the economy by lending out money that is idle. Furthermore, if all the financial decisions made in giving out loans fail to be repaid, the debt-based monetary system obliges the government to bail the banks out using taxpayer money. This creates a system where banks can make money out of thin air while creating an alliance between a small minority of politicians and bankers to profit off the backs of the rest of society in the name of a monetary policy.
The only way the pyramid scheme fails is when the players below the pyramid bail out of the game. Otherwise, the bankers and politicians continue to gain by creating more profit out of thin air. As long as the game continues and the banks are still entrusted with other people’s money, the circle persists in a way that results in banks owning all the money in circulation as deposits or money given out as debt. By buying bitcoin and transacting in bitcoin, you opt out of a fiat system that is built and exists mainly to profit off your hard-earned money. Unlike the fiat system where any deposit you make is equivalent to the bank repossessing that share of the money in supply, any Bitcoin which you own as money is truly yours and only yours. The exception is is you keep your bitcoin on an exchange where it is treated the same way as banks treat your money. When you transact with Bitcoin as your currency, one prevents banks from controlling all the money in supply (and in turn owning you). The revolution Henry Ford foresaw is Bitcoin.
Bitcoin removes limitations existing in fiat-based currencies. As a good medium of exchange, Bitcoin allows you to transact anywhere and anytime. No daily limitations on the maximum amount you can send or receive. As a self-sustaining system that has no intermediaries, you can hold any amount of funds with bitcoin and no one can freeze or limit who you can transact with. Bitcoin is a purely digital asset; so long as you keep your private keys with you, no one can confiscate your Bitcoin. The nature of Bitcoin is that users literally become their own bank. With your wallet seed phrase in your head, one can move about their daily activities and travel anywhere in the world while controlling millions worth of bitcoin. With just an address, you can send or receive bitcoin with no need for approvals permission or 3rd parties charging pointless fees. Furthermore, setting up a Bitcoin wallet does not require anyone’s approval or scrutiny.
Unlike fiat-based money transfer services, no one can impose any terms of service that you don’t understand. As a result, you don’t sign up for liabilities or pick up consequences that you don’t mean to in order to transact. In regards to transactional freedom, Bitcoin is the most inclusive financial system. The human element in finance unavoidably breeds bias. As a decentralized system, no one is in charge and therefore doesn’t have any preference as to who should or shouldn’t use it. By being independent of human bias, Bitcoin spans across all genders, races, ages or sexual orientations, serving all equally.
A harsh reality is that governments intentionally make you poor by printing and devaluing money. Despite the narrative of printing being necessary to stimulate economic activity, it simultaneously results in devaluing all existing money. This makes any money you hold lose its purchasing power. As a result, the same effort required to live will always increase. The resulting inflation hits lower-income earners more. The low-income earners are the ones who pay the heaviest price in an inflationary money system where there’s a sky-high ceiling to the amount of money that can be poured into the economy. The decisions around monetary policy aren’t always sound and when they fail, the results can be disastrous to an economy. An example is in Venezuela where poor monetary policy resulted in a rapid devaluing of their currency to the extent that the weight of notes required to buy a whole chicken weighed more than the chicken itself.
While inflation is disastrous to an economy, money printing also has its winners too. The inflation caused by printing money is famously referred to as a poor person’s tax because those who hold store value in fiat are the ones most hit. With Bitcoin, the amount of Bitcoin in circulation will always remain capped to a certain limit and as a result, the more people use the currency, the more its purchasing power increases.
Privacy and trustlessness
Of interest is the fact that the fiat-based monetary system enables the most sophisticated surveillance system that can be conceived. While the worry around surveillance is mainly focused on the internet and other communication channels, the amount of surveillance made possible by the electronic cashless system is greatly overlooked. Financial services offered by both banks and financial applications collect a lot of personal data about their users. There is no option for anyone to use the existing fiat-based electronic services without revealing a great deal of private information about themselves. This hurts any amount of privacy one might wish to enjoy while transacting. Additionally, financial services generate a lot of financial information relating to all our daily financial affairs. Banks and financial services know who you transact with, what your sources of money are, and what you spend your money on.
Surveillance of their customers is greatly incentivized for both banks and financial services because such information is valuable in allowing businesses to profit more. The financial benefits accrued from surveilling customers supersede the motivation to respect the customer’s privacy.
While using Bitcoin frees one from giving away sensitive personal information in order to transact, the amount of privacy one can enjoy while transacting with Bitcoin is largely dependent on how well one uses the technology. In fact, since Bitcoin utilizes a public ledger to enable transactions, it can equally serve as a great surveillance tool. However, with the right tools when using Bitcoin, one can be free from intrusive surveillance. A good wallet is usually a start but further using conjoins allows one to use it privately. By using bitcoin anyone can reclaim their privacy and at the same time unsubscribe from the fiat-based electronic transfer system, which exposes you to exploitative banking practices.
Bitcoin may have its fair share of challenges in its use as a currency but it offers great features that make it a better alternative to fiat currencies. Everyone is allowed to take advantage of Bitcoin to enable them to transact without “middlemen”, as Satoshi intended.