Why Do Bitcoin (BTC)s Have Value Against Fiat Currency? – Peter Jack
Whenever we hear about digital currencies, the first name that pops up in mind is Bitcoin. BTC is the first digital currency introduced in the financial world. Its value comes from it being the first cryptocurrency that is decentralized and the fact that no regulatory body has control over it. Buying BTC is not restricted to any group of investors or traders; anyone can buy it, receive it and sell it. They can buy commodities and do whatever they wish to with their Bitcoin.
With this increasing demand for Bitcoin, it is becoming difficult for some people to understand why is a decentralised digital currency becoming more valuable. In this world, fiat money is considered more reliable for people than any other currency. So, why are they moving towards adopting the digital currency? To understand why Bitcoin is becoming valuable against fiat currency, you need to understand what are the problems with fiat currency and what are the beneficial characteristics of cryptocurrencies. So, to know the answers to these questions, read on this article.
The Problem With Fiat Currency
Fiat currencies are controlled by Central Bank and Government. And in the big picture, any money that is controlled by the government and central banks is not truly sound or yours. Government manipulate the money supply of their country as the U.S. did a few months back. They like to spend more money than they collect from taxes and other sources of income and print more money according to their needs as they are in power. But when more money comes into circulation, the value of each currency (of that country) already present in the market decreases.
Bitcoin’s characteristics make it worth and valuable in countries such as Venezuela and Argentina, where economies are unstable. Here, the government heavily manipulates its fiat currency. There were times when the government of these two countries printed so much of their currency that citizens were not able to spend it fast enough before it lost its value. This has happened in some other countries as well and as a result, their whole monetary system fell apart. Citizens then had to find an alternative medium of exchange.
In 1912, a famous Austrian economist, Ludwig von Mises, wrote in his book ‘The Theory of Money and Credit’, that sound money has two characteristics. “It is positive in supporting the market’s choice of a commonly used medium of exchange. It is negative in stopping the government’s ability to intervene with the currency system.”
A government who is destroying its own money is possibly taking away the economic freedom of its citizens. Their right to have the same economic opportunities as the rest of the world becomes impossible. Thus, what they wish to have is a currency that is not controlled by a careless regulatory authority. And cryptos fulfil this wish.
Why Do We Use Fiat Currency?
The answer to why people are using fiat monetary system is because that is what is available to them from several decades. Since birth people are seeing the current system of paper money only. They were born in this existing government-issued money system. People are accepting the fact that the regular increase in the price of everything of our need is a natural process.
But this is hard to believe that the prices of groceries to education will keep on rising forever. Though this true that increasing prices are the result of inflation, why this is happening is a result of the government’s manipulation. And people are so used to growing up in this money system, that it is naturally hard for them to believe and accept that a new and advanced way can be a better option. Hence, the hesitation in switching to digital assets and currency.
In this digital and advanced age, a perfect new currency should have at least the following three characteristics:
The currency should be free from controlling or regulating authority
This will remove the factor of it being manipulated and printed at the authority’s own will. This will also allow people to use it for anything they want and use of the money will not be restricted.
New currency should be borderless
This will help in an easy exchange and transfer of money with anyone across any border or location. A borderless and worldwide acceptable currency can be the answer for faster and inexpensive method of payment.
The currency should be apolitical
Being apolitical will remove the point of currency favouring any specific system or group of people.
Supply of BTC is fixed and this is agreed upon by all supporters and participators of this network. Release and distribution of new BTC coins in the market is fixed and transparent as well. Bitcoin has no regulatory body that can control and influence the supply and direction of the currency. The correction of mistakes and problems in the current fiat currency system is bringing value to the first cryptocurrency introduced i.e. Bitcoin.
This is where cryptocurrencies such as Bitcoin (BTC)s come into the picture. Not only do they have a decentralized system, but they are also borderless. Hence, it solves the problems that are posed by fiat currency for the users. Cryptosphere is considered as an alternative to the current monetary system and may even replace the same in the future.
Published at Fri, 10 Jan 2020 08:20:08 +0000
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