With the advent of bitcoin and blockchain technology, some in the sector see a future dominated by these decentralized digital currencies. Platforms have a robust algorithm that performs the research for bitcoin traders and makes trading easy. Also, it helped many beginners to get started with bitcoin trading. However, questions remain about how these new financial instruments will affect society. Will we all be using bitcoin instead of fiat currency? Can the current system of centralized currencies survive in the digital age? If you are interested in trading Bitcoin, you may consider using a reputable trading site that will help you improve your trading skills.
Fiat currency vs. Bitcoin
Bitcoin and fiat currency are more than just two different kinds of money people can compare. They are at the heart of a fundamental conflict about how we govern ourselves. (pinnaclemontessori.com) A government with a central bank can create new money at will – usually in response to political pressures – and that money often has little or no value except as legal tender.
In comparison, bitcoin is an alternative, decentralized form of currency that could not be created arbitrarily and would exist outside government control. The difference between these two forms is stark and goes beyond simply being an ideological preference for one over the other.
Bitcoin vs. Fiat Currency: Decentralization
The big difference between bitcoin and fiat currency is that any government or centralized institution doesn’t control bitcoin. The advantages of decentralized money are apparent when you look at governments such as Zimbabwe, where inflation has made the country’s fiat currency worthless.
With the help of its central bank, the Reserve Bank of Zimbabwe, the government has – at various times – been able to push up prices for goods and services. It is a way for a government to accomplish its goals without making difficult economic reforms or changing policies that are not working for it.
Bitcoin and blockchain technology would never allow this level of control over an economy. Instead, it is peer-to-peer. Bitcoin can be exchanged directly from person to person without a centralized authority. Users control Bitcoin, and its value is based on an open market transaction system, which allows a price that makes bitcoin more or less appealing to buyers. In other words, the volatility of bitcoin can have a regulation by those who need it most: the consumers themselves.
Bitcoin vs. Fiat Currency: Privacy
A central bank may have a hand in creating money but – at least in theory – it’s not controlling it once created. However, government-issued fiat currency is more closely tied to the government itself than money used with bitcoin would be. A government’s ability to see into its citizens’ personal finances is a fundamental right in many parts of the world.
But it’s also a dangerous power that history has shown can be abused. Under the current system, people can trace transactions, balances are present, and taxes are collected. As a result, it’s possible to purchase illegal goods and services with cash, but it’s far easier to hide your identity with bitcoin. With so much available information about fiat currency, it would be almost impossible for someone to spend without revealing their identity and accepting some economic consequence for their actions.
Bitcoin vs. Fiat Currency: Transfer
Finally, bitcoins are a far more efficient form of currency than fiat currency. Think of all the steps that have to take place between when you send a check and when it’s processed by the bank where it’s deposited.
Clearinghouses and other intermediaries must have a use case to send money from one country to another. It is why international wire transfers can take days to process – sometimes even weeks. That’s not the case with bitcoin, which can move seamlessly around the globe without delays or loss of value for any part of the transaction.
Bitcoin vs. Fiat Currency: Supply
Fiat currency is subject to the whims of those in power. Take the US dollar, for example, as there is no limit to how much money the Federal Reserve can create or destroy, and it does so in ways that directly affect the economy. If a government wants to stimulate spending, it can print more money, leading to inflation and devaluing the existing currency. As fiat currency has less and less value, it encourages people to spend their cash before its value drops too much.
It can lead to economic booms and busts and market bubbles that harm everyone except those at the top – usually politicians and bankers. However, the same is not valid for bitcoin, which miners cannot manipulate. For example, suppose the global supply of bitcoin is changed to devalue the existing currency. In that case, users will know immediately because their holdings are tied to the blockchain that records each transaction. However, the total capped supply of bitcoin will only increase if 51% of the investors agree, and savvy investors will never agree to change the capped supply of bitcoin.
