Bitcoin vs. fiat currencies, meaning bitcoin and all cryptocurrencies, will be the future of financial transactions.
Someone said that the internet is going to be one of the major forces for reducing the role of government.
The one thing that's missing but that will soon be devolved is a reliable E-Cash A method whereby on the internet, you can transfer funds from A to B without A knowing B or B knowing A.
What is the Bitcoin, and what is supporting it?
You put some of your money, real money online, and it turns into Bitcoin. Bitcoin turned into a massively multiplayer online game where speculators are trying to help each other.
Is it a mean of exchange or an asset class? The subject Bitcoin is known even by our elders. Jason Seibert's grandmother asked what is Bitcoin stuff anyway.
Jason asked his grandmother if she remembers when VISA Cards first came out.
Before VISA Cards, you used to paying with cash or CECs, so it was a new and weird system that you didn’t understand.
So Bitcoin is the new evolution of payment systems. But what do you think? Blockchain vs. Bitcoin, who do you think will eventually become even stronger?
Bitcoin, "by now," you probably heard of it.
The wild fluctuation in his price has gain attention from the leading financial media. Also, attracting controversy and hate from the current banking and monetary system.
However, Bitcoin is much more than just your average investment, and beneath of hype, hysteria lies what could be the most important technology of our lifetimes.
So, to fully appreciate the characteristics that make Bitcoin a potentially world-changing technology, we first need to understand what money is.
What is a Fiat Currency, and how is it Different from Bitcoin?
The currency started developing 6000 to 9000 years ago, some medium of exchange, and people used something of value.
Societies around the world started to select gold and silver as their primary currency about 3000 years ago. In the year 680 BC, they became money when melted into coins of equal weights.
The government's started creating representative currencies where you deposit gold and silver, or they have gold and silver in the treasury, and they come out with notes.
So, creating a claim jack on the gold supposedly as good as gold because you can always convert it back.
Throughout history, precious metals are chosen as money, not through government decree but because of their unique features.
Gold is rare, easily recognizable, portable, durable, and divisible.
Above all, because gold is difficult to find and labour-intensive to mine, refine and mint. Is Bitcoin a fiat currency? You will learn in this piece of writing.
Precious Metals Always Perceived as a Store of Value, but what about Bitcoin?
In modern history, as World War Two was coming to an end in 1944, the allay nations meet in the small town of Bretton Woods New Hampshire.
It was here where they drafted a new financial system that would stabilize the world's financial system once the war ended.
With the United States poised to enter a golden age of prosperity, the US dollar was chosen to be the world's reserve currency.
The Bretton Woods system got created after the Second World War of the Bretton Woods conference in New Hampshire.
So rather than using gold as a means of exchange between countries as was the case of the old gold standard, the dollar is going to be used, and the dollar got chosen because back then, it was as good as gold.
Under this new system, the countries of the world would tie their currencies at a fixed rate to the US dollar and because most of the world's gold got held in US volts.
The US dollar would be backed by gold at a fixed price of $35 per ounce.
Therefore, creating a system where the currencies of the world were effectively backed by gold for the US dollar. The Bretton Woods system lasted for about 25 years.
In August of 1971, President Richard Nixon called for an emergency press conference where he announced foreign countries would no longer be able to convert US dollar holdings into gold.
His Surprise Move is Known as the Nixon Shock
With this one announcement, President Nixon effectively created our current monetary system.
A system with no fiat currency needs gold or anything of value to back it up. Our current monetary policy is known today as a Fiat currency.
Fiat currency is a currency that is backed by nothing except government promises. The word FIAT comes from the Latin word, and it means the get supported money that is circulating by force.
If people have confidence in fiat currency and if there's enough government force that will enable the fiat currency to circulate for some time.
However, that’s until people lose confidence in the fiat currency.
Gold vs. fiat currencies or bitcoin vs. fiat currencies?
We know that every time something else proved to be of more value thru out history, the governments decided to take them down.
Much like gold, bitcoin vs. fiat currencies are experiencing the same problem.
Money is a Medium of Exchange
The way it has evolved is that it's always something of intrinsic value.
Until the modern age, when politicians decided we don't need anything of intrinsic value anymore, all we need is a political decree.
We can say this is money, this piece of paper is money, now money has a new characteristic.
However, underneath it all, there’s the same concept in place that nobody ever seems to challenge.
The Government has the right to declare something of no value to be money, and you must accept it.
That's the real problem today and without anything tangible backing the fiat currency as we use today.
Governments around the world have been able to issue an unlimited amount of new currency without restraint.
Similarly, with the advent of the digital age, currencies around the world are now digits in a global banking database.
So what is Bitcoin?
Well, put, it's a digital currency, much like the electronic currency we use today.
However, it's also the payment network that facilitates the transfer of this new digital currency.
Bitcoins it's a new internet protocol that enables the transmission of value over a communications channel.
Think of it as being able to send a gold coin as easy as an email. Allows users to send any amount of money, anyone in the world, anytime, can’t be seen, confiscated or frozen.
A useful technology, in my opinion.
The bottom line is that this digital currency and a payment system work the same way as the bank's system or PayPal.
But it's also a currency, so PayPal and banks use the dollar as their fiat currency.
The Bitcoin payment system uses Bitcoins as its currency, so they both have the same name.
Others are calling Bitcoin vs. fiat currencies a Disruptive Digital Currency
If you're looking for the idea that money doesn't have to be something physical but something virtual, that's the system we already have.
However, what is this Bitcoin supposed to do differently from what we already have?
Bitcoin is different from other fiat currencies in a couple of ways, but not the way people think.
Most people think it's different because it’s a digital currency, but fiat currencies are also digital.
So the dollar is a digital currency. The Euro is a digital currency; they're all just ones and zeros in the banks of the world.
The real answer to the question, why Bitcoin is unique? It is in that it cannot comes out of thin air.
So dollars, euros, yen can be created out of thin air by people who have permission to do so, which is generally a Central Bank.
Bitcoin cannot get created out of thin air, so it is a Scarce Digital Asset.
Unlike the banking system, we currently use where bureaucrat meets behind closed doors and determine or regulate the supply of new fiat currency.
Instead, mathematics and cryptography are used to regulate the creation of new bitcoins.
The Bitcoin network is decentralized, which means that transactions and account balances do not get stored on a central computer or database.
Bitcoin ledger of accounts, more commonly known as the blockchain, gets distributed across tens of thousands of computers around the world.
It is taking bitcoin Vs. Fiat currencies, it is easy to identify, which is superior.
Napster, some of us will remember the application
So with that app, we can download music and movies. But after a while, it got so big and famous the government came in and shut it down because of copyright infringement.
Then somebody created something called the BitTorrent network. A software people run on their computers that allows file share.
Similarly, if you run the software, you can go to websites like Piratebay or BTjunkie to download music or movies.
Why is it different from Napster?
Well, governments can't stop it because it's not a centralized location. Now, Bitcoin is the currency that runs on the BitTorrent network.
Fast Recap of why Gold and Silver were Considered Money for the last 4000 Years
Because it took work and effort to make that sweet, beautiful coin. They had to dig it out of the ground, refine it the crucibles and furnace.
You don't have to trust anybody that they were going to work for you because the work got already completed.
Bitcoin Proof of Work is the same thing
You have to hash away and solve all these math problems, add the chips, electricity to create the Bitcoin.
Today it will cost you around $600 to mine a Bitcoin.
Bitcoin has Multiple Levels of Intrinsic Value
- Firstly, one of Bitcoin’s features represents the fact that It cannot get confiscated.
- Secondly, censorship-resistant value transfer that no one can stop you from sending. More importantly, what gives it an intrinsic value is the productive capacity and the brainpower of some of the brightest developers in the world.
Developers that have chosen to work on this open-source protocol and this productive capacity of the brightest minds that are building it that is what truly gives it value.
Thousands of Computers on Bitcoin Network Cryptographically verify Bitcoin Transactions
The use of such powerful computers, known as miners, spends a massive amount of energy and processing power to verify the integrity of every transaction. So the miners validate transactions.
The network has not formally vetted all these transactions of flying around and them.
If the miner believes the transactions are valid, he will put them in the block in the block then becomes part of the blockchain.
Over time it is becoming the record of truth. So what that means is if you receive Bitcoin and a few blocks happen after you receive it, no one can ever take that money away from you.
Because of that, the blocks are stuck into the blockchain, can't get reversed, and you know that the money is truly yours.
The Decentralized Nature of the Bitcoin Network Eliminates a single point of failure and makes it impossible to be hacked or shut down
Bitcoin transactions are transmitted peer to peer without the need for a third-party, meaning that the user is in complete control of their money.
The beautiful thing about it is that it is impossible to shut down.
That's a beautiful thing about it; there is no bitcoin place you can’t shoot Bitcoin. It has no centre of gravity; no headquarters you can't shut it down.
However, there is a way, the only way you could destroy Bitcoin is shutting down the internet.
The average person has no idea how their email works. But it works, and that's all that matters, and Bitcoin is very similar to that.
Let’s try and describe Bitcoin to people. Put, it's a form of money that you can use on your phone or computer in today's digital age where everyone is on the internet.
This digital currency is much faster than most of the banks, and it has risen in value since its inception in 2009.
For new users, the inner workings of Bitcoin can be quite complex and daunting. However, what's important is how this revolutionary technology changes how money gets transferred globally.
Right now, every single payment that you make to another person goes through an intermediary.
PayPal, Banks, Visa, or MasterCard. More importantly, the government or jurisdiction who decides if you're allowed to make that payment.
Payments could get stopped halfway through, and then you have to try and get the money back.
No one can stop Bitcoin transactions from the moment you decide to send another person's digital value.
So you can send Bitcoins, and there is nobody who can stop it. Similarly, no one has to permit you to pay another person money, and all they need is an internet connection.
Bitcoin has the potential to displace the need for banks as a trust institution.
If people exchange currency or Bitcoin and it goes on the blockchain Ledger, we don't need a bank to confirm that it is a valid transaction.
The main differences between Bitcoin and the banking system are that it doesn't require a third party to perform.
When people deposit into a checking or savings account, they are loaning the bank their currency.
The Reason Why Central Banks and Governess are Afraid of Bitcoin VS Fiat Currencies
So the people are depositing money into their savings or bank accounts, therefore, loaning the bank.
The bank is now entitling to your money, and they have a liability on their books to pay you back one day.
Ultimately banks get to do anything they want with that money where you depend on intermediaries.
So third-party or counterparty has to perform for you to get the currency back.
Cryptocurrencies Invert the Power Structure
It isn't a few people at the top controlling a whole bunch of people at the bottom, and the power goes to the individual.
The same with the internet flattens access to information and allows anyone with an internet connection to learn anything.
Similarly, to communicate and engage in activities with anyone else on earth.
Bitcoin does that with money.
So now anyone on the planet no matters their age, arbitrary geographic location, or the arbitrary rules that get governed over them can engage economically with anyone else directly.
Also, as profoundly influential as it seems, you do not need a bank account to interact with Bitcoin.
You don’t need a bank account now to receive an honest payment from someone else in the world and know that the money is legitimate.
So money now can't be censored. Any two people can send it between each other through Bitcoin.
The Cryptocurrency Bitcoin Has Defied and Surpassed all Other Asset Class
Headlines such as: “Bitcoin is spiking above $18000”, “Bitcoin’s incredible run going into the holidays,” or “Bitcoin has seen a pretty big pullback 30% in a week and 50% loss in the year”.
The past year we witnessed the price of Bitcoin rise and fall in dramatic fashion.
Also, getting the attention of Wall Street and the investment community.
The public now sees Bitcoin as a speculative asset class that can get traded, but the core fundamentals of this vital technology cannot get overlooked
Bitcoins Importance for third-tier Economies
The use of Bitcoin is particularly crucial in the developing world, where billions of people are without essential banking services.
People see the price of Bitcoin all the time, especially in advanced societies, and focus more on the price.
Such people think that Bitcoin is an investment solely and that it goes up and down like a stock based on news and expectations.
The fact is that probably more people in this kind of third economies that might not know a lot, but they own it.
The reason their Bitcoins are that they need it and not because they expect to get rich or hope to get rich. Also, because they need to protect themselves against both; destroyed fiat currencies and capital controls.
People who think of Bitcoin as investment needs to realize that Bitcoin is exciting because it's the future money.
Cryptocurrencies are something else, something unique that became a significant investment.
With cryptocurrencies and Bitcoin, it so happens that both scenarios can get accomplished at the same time.
One of the great powers of whether it's Bitcoin or any other cryptocurrencies is the technology itself.
If we can figure out how to scale the technology, we can solve a lot of problems in the financial system.
It will allow us to transact with each other globally at a little cost and very useful.
Also, there's tremendous market power that has nothing to do with anyone in the financial system.
People want to be able to communicate and transact with each other naturally and quickly. The hunger to do just that is enormous and too late to stop.
Today Bitcoin looks as a Financial Asset Whose Bubble Popped
As the technology develops the blockchain that powers Bitcoin may be used to verify transactions other than the transfer of money.
Each Bitcoin is divisible into 100 million of a bitcoin called a satoshi. These tiny fractions of a bitcoin can be programmed to represent assets other than money.
Therefore, the Bitcoin blockchain can be used to verify transactions of all kinds of items without needing a central authority.
The Bitcoin blockchain is a tremendous technological innovation that enables distributed consensus.
People can agree on what the state of the ledgers should be and what it is. It enables people to have trust without trusting any other third party, person, or institution. So anywhere we need to have faith.
Also, we need to be able to verify what is the right and correct state of something. That is an application that will get put on the Bitcoin blockchain.
The Same Problem for 6000 Years of Recorded History
Humans always had this problem by not engaging in this consensual exchange because we are strangers.
Questions and doubts about trust are what happens. So what's happening with Bitcoin? And the blockchain technology is that we don’t have to worry about that.
Now we can have a trustworthy exchange without those third-party. Read more about consensual exchange or the financial Law HERE.
The trust gets built into the cryptography that guarantees the exchange of value. So it means that this technology is as disruptive as the internet was.
Also is disruptive to these hundreds of different institutions that glued society together.
Everything from notary public's, voting, or governments all those rigid things can get recreated in the blockchain.
We can recreate them in a way that will finally be able would trust. What that means is that we've seen technology do to lots of private Industries will now start doing the government functions.
Understand the Implications of Bitcoin
So 100 million bits of a bitcoin is a Satoshi, and you can program that to be anything of value.
It can represent titles for cars, real estate, diamonds, Gold or votes in elections, etc. Anything of value can nowadays be digitized and tokenized on the blockchain and also transacted.
It can get sent across the internet without having to go through a trusted third party.
Bitcoins will Revolutionize Latin America, Africa, Southeast Asia
The blockchain and bitcoin will change the world and everything else regarding protecting people's identities.
It will allow people to own property and also help the 2 billion people that don't have a bank account.
Similarly, help the 5 billion people that can’t prove they exist or don’t have title to Real Estates.
Representing the way bitcoin is going to help those people. And this is how they will jump from the third world to the first world.
People will now own real estate or have transparent elections, and it can't get hacked. Just imagine how just a couple of factors will improve the lifestyle of many people.
Ultimately this technology will be able to transform our world into a Utopia, and it will probably need another 100 years to develop fully.
Corrupt Governments Tries to Seize Power Yet Again
Since anyone can start using bitcoin by can installing an app on their phone, it has pushed governments to take drastic measures.
Bitcoin can be used by the developing world to protect their wealth from unstable currency and government control.
We are all seeing manifesting as a currency crisis in Venezuela, Nigeria, or Zimbabwe, where countries can't get a grasp on her monetary policy.
The underbanked or unbanked population no longer lies in the hands of the corrupt government, centrally planned economies, or central banks.
Anyone who lives in the United States or Europe can get a bank account very quickly. Also having a credit or debit cards, they don't find any friction or pain points.
However, in a country like India, there are 233 million unbanked individuals. Such people don’t even have access to traditional financial infrastructure, and so they are operating cash payment to cash payment.
Bitcoin Will Become a Game changer for Individuals
Currently, Bitcoin transactions can sometimes carry a significant fee making it unsuitable for small operations.
However, Bitcoin is programmable money, meaning that new layers of technology can get integrated into it.
What if that technology got already developed? RapidX and Lighting networks can help to reduce the cost, and they already been successfully tested.
At the moment, Bitcoin is becoming more popular even in current market conditions.
The biggest challenge for cryptocurrencies and Bitcoin is the computational power need for each transaction.
For now, Bitcoin can carry out four to seven transactions every second, and with lightning, technology can become one million transactions every second.
It will make it so much more efficient and so much cheaper for the average person.
The Integration of the Lightning network into the Bitcoin Protocol
What will happen with this integration is that bitcoin will be a fast, cheap, and efficient payment system.
Once implemented, this will have enormous implications for the developing world.
The biggest stumbling block to do international business is the payment system.
If you're applying for credit cards from some particular countries, they are associated with fraud, and the rates of those credit cards are astronomical.
So something like 33% of the credit card transactions coming from Africa is fragile.
Therefore, nobody wants to take business from Africa because it’s just too risky. With bitcoin, you know the funds are good, so as a merchant, pay with bitcoin.
Bitcoin technology has a tremendous impact on such businesses. You can get access to these types of products and services, and then they can start having property rights.
Such property rights are what's going to help to get out of poverty.
In today's digital world, governments have started to phase out cash, replacing it with the digital currency.
In this environment of concerns over personal privacy are very real, bitcoin provides monetary sovereignty outside the control of government policy.
If the government is trying to control, they do not want people to have the means of hiding anything from them.
Not just from a cyber attack standpoint but also the government wants to know what everyone is doing in a very "Big Brother" fashion.
So the way we have to look at bitcoin is as the ultimate monetary weapon that the people have never had in history.
Every Government in the World wants to Go Cashless
One of the reasons is that in a cashless society, you are not able to exit the banking system.
When people panic, they run to the ATMs or the bank, and they withdraw money. The other thing is that governments are starting to run out of money and they don't build anything.
Governments are just using other people's money, so they are treating everyone as a tax evader.
The main reason why bitcoin is so popular and famous is not that of its finite supply or being gold. It’s because of anti-money laundering laws preventing people from doing what they want with their money.
One of the central government functions is to create currency, and bitcoin is successful because of its potential for circumvention.
As to whether that bitcoin is illegal or should be seen legal remains at our discretion to decide.
But What About Fiat Money?
Fiat money gets always used for a lot more illegal things that Bitcoin has through the years and still is today.
Also, fiat money is untraceable, easily transportable; nobody knows where that money has been moved from hand to hand.
So, in reality, it is a matter of making that connection that a cryptocurrency is not a new thing.
It's just a different version in a digital form of something that existed in our society and legal structures for millennia.
Bitcoin is shifting the paradigm and challenging the Legacy financial system
Jamie Dimon, chairman and CEO of JPMorgan Chase America's largest bank was quoted calling “bitcoin a fraud.”
He said:
“The reason is that the government's first thing they do is form a currency.
Also, they like to control the currency with a Central Bank and knowing who has it, where it is and where it is going.
Then we will only wait to see if someone gets hurt, or we will only monitor if it gets used for this purpose.
We should have somewhere used currency for this purpose, but governments can guaranty to close it down.”
Well, good job Jamie for clearing that up for us. So, in essence, Bitcoin is a fraud because the government or Central Banks do not control it.
If Jamie D. did some more research before making that statement, he would probably understand that Bitcoin was designed not to be controlled by governments.
Developers and Crypto Enthusiasts replied to Jamie Dimon
Quote:
“Asking banks if they like Bitcoin is similar to asking a King if he likes Democracy.
People are knowing little about the upcoming technology and having the audacity to call developers criminals.
They are not criminals, and the whole reason this ecosystem exists is that governments are the real criminals.
It doesn't matter at this point what they think the Genie out of the bottle.
Somebody reading this article or somebody around the world will solve the problem with the decentralized landing.
Within ten years’ thanks will become less relevant just like landline telephones have become.
We will wake up one day we're going to be in charge of her own money, and Jamie Dimon can watch in retirement the world as it is. Not the world that he would like it to be.”
The Bitcoin blockchain gets built on decentralized consensus outside the control of a central party
That said, with the hype in the rise of cryptocurrencies such as bitcoin, banks are preparing for war.
Both central and commercial banks have started to develop their digital currencies on what we call blockchain technology.
The biggest fear is that governments and fiat national currencies will adopt blockchain technology.
It will run on blockchain technologies in the entire monetary system globally will eventually become cashless.
So if it's centralized and there’s an entity that runs the blockchain, they can lock you out of it if they don't like what you're doing.
Also, they can trace everything that you do, every transaction, everywhere you go it will be recorded.
Blockchain technology at the government's fingertips can enslave us.
Blockchain or any other open Ledger Will have a Tremendous Impact on our World
Former bankers, traders, brokers fear if blockchain gets used to centralize the digital technology might give banks ultimate power.
Also, give them the ability to put a chip in you and to text you whenever they want.
But that’s not all they can interface with the money system with you physically at a perfect the collateral.
So, we all love the innovation. However, the question is, how can we innovate and make the financial system more efficient.
Also, at the same time, we distribute the power lines in the political system.
More from Jamie Demon
Quoting:
“The blockchain technology is good. We use it for different other things GOD Bless Blockchain and bitcoin vs. fiat currencies will grow stronger in time."
Cryptocurrency and digital currency, I think, are also excellent. JP Morgan moves 6 trillion dollars every day and happens not done in cash but digitally.
If we move to do it on the blockchain digitally, so be it, but it will still be a dollar cryptocurrency.
What is Blockchain?
Bitcoin vs. blockchain, two different things but cannot exist one without the other.
The majority of people are using the word blockchain, and they don't care whether it has this decentralized mining.
The government is going to have a digital representation of the dollar that they can call it a blockchain.
However, there's not going to be mining won't be decentralized. It is going to be a centralized coin. So if people call it, a blockchain or not is irrelevant.
The whole purpose of a blockchain is to remove control from a central party.
If Central Banks makes a blockchain for dollars, then you have dollar coin. So they still have full control over the currency, creating how much they want or where it goes.
That said, there is no point in having a blockchain at all. You might as well have a centralized database like a banking system.
How to use Blockchain and Bitcoin
To use blockchain in a meaningful way, it means that there is no person in charge.
Central Bank, by definition, is the one in charge of the money, and they would never create a blockchain or cryptocurrency that they couldn't control.
So that's why they will likely come redundant because the market can choose which kind of money uses.
The market can choose between:
- A digital currency that can and will be controlled by central parties and inflated without limit.
- A digital currency cannot get controlled at all by any central party and holds a fixed amount in computer-based.
Over time, that´s going to stay an undeniable choice, and Bitcoin in the blockchain already proved to imply incredibly powerful technology.
As the future unfolds, you can use these technologies to restructure the financial system into one of fairness and equality for all.
Bitcoin and Blockchain will Mean to be Outside the Control of the Banking Elite
Millions of people are taking an interest in what is money. The question of what is money, what should it be and their learning, especially a lot of young people.
Precious metals were once money, and then came the era of paper fiat money. Could we now be entering a golden age of decentralized digital money?
Only Time Will Tell
Bitcoin is first and foremost about changing how the financial system of the planet operates.
However, because bitcoin is also a financial asset itself, it goes to these bubbles.
People have made many millions of dollars after buying bitcoin low, and then it goes up in value.
But that's not really what matters.
All that matters is that it's going to change the entire ecosystem of the planet.
It is a fascinating thing to be part of and withies how humans will interact with each other soon.
Bitcoin vs. fiat currencies
