Bitcoin and the future of fiat money
The world truly needs bitcoin and other cryptocurrencies to promote economic growth but not to replace fiat currency.
Bitcoin leads in the cryptocurrency revolution, swiftly transforming how people send and receive payments today. Bitcoin is a decentralized digital currency used globally as an investment instrument and payment method. Since its release ten years ago, bitcoin has rapidly risen to become the most valuable asset class today, outperforming commodities like gold.
And, that is why some people are increasingly worried bitcoin could soon replace fiat money. The following article compares some of the characteristics of bitcoin with fiat money to determine its impacts on the future of paper currency.
The Characteristics of Bitcoin and Fiat Currency
Compared to fiat money you can touch and feel, bitcoin is a digitized currency that is only accessible online. While bitcoin is intangible, it holds a higher value than most paper currencies.
Central banks and governments issue and regulate the circulation of fiat currencies. Those regulations also limit the amounts of money that institutions and individuals are allowed to transact. Besides, fiat money transactions also require intermediaries to verify, making the entire money exchange process longer and costly.
Decentralization means Bitcoin is not subject to any form of government regulation. Therefore, bitcoin users are free to send and receive payments globally at their convenience. All bitcoin transactions occur on a blockchain that does not require a third party, ensuring faster and low-cost money transfers.
The supply and circulation of fiat money depend on government policies and political influences. Governments have the exclusive authority to decide how much fiat currency should be printed and circulated.
Bitcoin does not have a central controlling authority. Instead, bitcoin miners generate new bitcoins by solving complex math puzzles based on the market demand. However, this digital currency has a cap of 21 million only. That means not a single extra bitcoin will ever come into circulation after miners have attained the 21 million bitcoins, even if the demand increases.
How Bitcoin Could Impact the Future of Fiat Currency
Bitcoin and fiat currencies are different in many ways but, both are financial instruments with intrinsic value. Today, people in many parts of the world accept Bitcoin as a value storage and exchange medium, just like paper money. Several mainstream financial institutions and retailers are increasingly adopting bitcoin as a means of payment, alongside the traditional cash and electronic payment options.
People also trade Bitcoin on global financial markets, just like stocks and other high-value commodities. Reputable crypto trading platforms such as Bitcoin Champion allow users to trade and invest using bitcoin, other cryptocurrencies, and fiat money. Many companies, including car manufacturers, health service providers, and retailers, are adopting bitcoin to diversify their investments.
The above pointers clearly show bitcoin and fiat money serve the same purposes, facilitating financial transactions. However, bitcoin transactions are faster, low-cost, secure, and transparent than fiat currency exchanges. Bitcoin is also easily accessible, using a smartphone, tablet, computer, and the internet, compared to fiat money that people can only access through banks and financial institutions.
Although bitcoin has significantly improved the global money transfer platform and outperformed fiat currency in many ways, the co-existence of the two remains critical to the worldwide economy. Bitcoin currently holds more significant value than most fiat currencies but, it is also a highly volatile financial instrument whose worth could turn into ashes in a matter of days.
The world truly needs bitcoin and other cryptocurrencies to promote economic growth but not to replace fiat currency. Paper money has evolved over the centuries and will undoubtedly stand the test of time despite the stiff competition from cryptocurrencies.