The purpose of any given currency is to serve as a medium of exchange and store of value. Most modern societies put a significant amount of trust in their FIAT currency because it serves its purpose very well. But does it really?
You can buy a pack of gum with paper dollars, but it’s illogical to purchase a business, buy a Tesla, or secure real estate using FIAT currency. You may get pulled over with a large bag of cash, robbed or hit by a bus…
There are inherent risks involved in using fiat currency as a true medium of exchange and therefore, most people are actually placing their faith in financial institutions, not FIAT currency. Naturally, these institutions are happy to facilitate transactions for a fee or leverage your savings for their own agenda.
As a store of value, FIAT currency is one of the weaker options available for any sizable amount of wealth. While governments accept billions of minted/printed/digitalized FIAT dollars every year, wealth for the underlying participants is diluted to simply minimize the volatility of a FIAT dollar. We once again turn to financial institutions to provide a solution.
Bear in mind, I don’t take the position that our FIAT infrastructure is entirely broken and in need of a revolution. I won’t go into a political debate about double standard regulations and global corruption in our financial markets. I won’t compare the value of corn, oil, milk and how it affects your FIAT purchasing power. I won’t even pose the question if a volatile currency is beneficial to the average Joe AND the modern banker alike… Just stating a few facts in a generally one sided argument.
Bitcoin enters the picture:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.”
“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.”
“We propose a solution” – Satoshi Nakamoto
Whether you are a farmer in Greece, a billionaire selling trips to space or a millennial in the U.S… It’s easy to argue that Bitcoin is a better medium of exchange AND store of value:
- Bitcoin is decentralized and transparent – a peer to peer network verified by its own participants, not a centralized banking system.
- Bitcoin is a non-trust based system – a currency that relies on cryptology and algorithms, not banks and regulators.
- Bitcoin is global – cryptocurrency can travel fast and far without being impeded by borders or policed by governments.
- Bitcoin doesn’t require special permissions – you can use Bitcoin to buy a car, corn, real estate, a trip to the moon, or even some of those naughty items that were once purchased exclusively in FIAT currency.
- Bitcoin is secure – Cryptocurrency transactions and holdings can be just as secure, if not more secure than the average debit card or bank account.
- The value of Bitcoin is what we make it – Bitcoin has a finite number of coins, unlike FIAT currency, you can’t mint, print or mine an endless number of “coins”.
I will leave it at…you decide if bitcoin is the future, but to me it seems as if it has already been decided.