Can bitcoin fix the Global economy?
Remember the scenes from the 2014 movie; ‘A million ways to die in the west’? I’ve lost memories of most of them. However, I still remember the scene where a dollar bill was put up as a wager for a shooting challenge. ‘Take your hat off boy, that’s a dollar bill!’ The excitement, the respect, it was a whole dollar bill. Fast forward to our contemporary society, dollar notes and every other fiat note are nowhere close to commanding that level of value and respect.
Years of continuous use by an ever-growing population of people, years of continuous printing by an ever-running printing machine; the value of fiat currencies has suffered so much from inflation and poor economic practices.
Staying true to its initial value is a losing war that it is tired of fighting and has given way to a steep-speed fall in value. The United State dollar remains the most widely used medium of comparison to the other fiat currencies, but despite this wide use and good economic backup, its value has been on a free fall over the past couple of decades.
A rather logical stuff, considering the fact that a higher percentage of dollars in circulation today were printed over the past five years. Other currencies have seen similar irregular inflation as the global economy continues to show instability. You’d agree that the current global economic system is imperfect, I’d say it is almost ‘completely faulty’. Despite surviving for so long, the fiat system and centralized currency issuing scheme haven’t really been so efficient. The parabolic fall in value over the years is a result of these shortcomings.
While dogecoin is taunted as the currency of a new world out of earth, bitcoin has surfaced in arguments over a healthier medium of exchange on earth, lol. Could both work? Elon Musk has a better answer for the former, I’ll share my opinion on the latter.
Bitcoin; it’s been one concept against tons of relatively older systems. The banks, the fiat system, the valuable metals, altcoins…dogecoin. For a concept that has seen such audacious growth in the past decade, it is not a surprise that bitcoin is constantly in many arguments. Thanks to the bitcoinners too; these maximalists find a way to throw bitcoin into every financial argument. To be fair, many of their argument over the superiority of bitcoin as an alternative to many contemporary financial systems is valid to a large extent; even though I don’t agree with bitcoin’s perfection.
Bitcoin’s technology flaunts generality and portability. If you’re not running a bitcoin core node, then you just need a lightweight application to manage your financial activities all by yourself. While this is convenient in the normal sense, it is not without certain shortcomings. Regardless, this shifts the power to the users in contrast to the current system where the ‘managers’ in the custody of your assets hold the upper hand.
Decentralization and ‘personalization’ put you in charge, a concept growing in acceptance in our contemporary world. In this case, bitcoin offers what the current generation longs for. Superior? In this case; bitcoin wins over traditional systems.
Bitcoin’s generalized value creates a global value system and a uniform currency. But how healthy is this? It is hard to say what a currency backed by a globalized financial system will look like, but if bitcoin succeeds at becoming one, then it will be an exciting experience. A financial system of this nature is largely unsustainable.
The segregation of national economies serves a good purpose itself. Placing different countries in charge of their financial success isn’t bad. Bitcoin’s generality contests this, an idea I don’t buy. Bitcoin doesn’t tick all the boxes for me; this is one of them.
‘There will ever be twenty-one million bitcoins’. Bitcoin’s fixed supply is regarded as a fix for inflation. For me, that works. Yes, it does. The global economy is riddled with unregulated inflation. Millions are printed from the tin air, just like the tether machines. Seriously, the tether system depicts the global economic system to a large extent.
Bitcoin cannot grow in total supply, circulating supply may vary as a couple of millions of bitcoins remain unmined and thousands of bitcoins are being lost to mismanagement and accidents. Instead of growing in supply; bitcoin can only grow in value, we have seen this play out very well.
Price stability? We all agree that bitcoin has a very huge work to do as regards this. Volatility is a huge turnoff if bitcoin or a similar technological solution will make it to the top of the global financial system. Despite an over 97% loss in value since its inception, the dollar has remained ‘relatively’ stable. Yes, compared to bitcoin the annual variation of the dollar’s valuation has remained constant. Exceptions to this are special periods like wars, pandemics, and related global or national situations. In contrast, bitcoin loses significantly when Elon Musk tweets, jokes apart!
Speed and cost-effectiveness? If the lightning network works the way it is proposed to, then bitcoin will have little to worry about as regards the speed of transaction confirmation. Lightning technology presents super-fast bitcoin transactions. However; if it fails to live up to the bidding, the bitcoin blockchain’s current speed isn’t fit for use on a large scale.
Imagine waiting for minutes to have your coffee after paying in bitcoin as transactions must be confirmed before your purchase is handed to you. A really tough situation. With fiat in your hands, you can pay for tangible commodities without having to pay a fee each time. This is different with bitcoin as well as many other cryptocurrencies. Paying a fee every time? There must be a better way to do it! Bitcoin doesn’t solve this.
Eco-friendly? Bitcoin is not any better than the current financial systems as regards this. While it is not necessarily worse, it is not better. Intensive use of fossil energy for bitcoin mining and intensive use of similar energy for running financial activities in today’s systems, both systems fail at this. However; if bitcoin is dubbed as a ‘perfect’ fix for global finance, it should address energy use and environmental compliance.
Bitcoin has made a bold statement. This statement is largely price-wise, apart from this it hasn’t progressed so much in technology and adjusting to fit the reputation of a better alternative to the global financial system and even a store of value. Relative to its competitors it is still in its early stage and has enough room to grow. With clever minds piloting its growth, it stands a chance of penetrating the global financial system; actually, it’s safe to say that it’s already done so. But this is just the beginning of a very long journey.
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