Could Bitcoin be the First Worldwide Currency?
Many will scoff at the very notion of bitcoin as a worldwide currency. “It doesn’t scale,” “it’s not backed by anything,” or “it’s an elaborate Ponzi scheme” are common critiques of the financial and technological innovation. Such sentiments show a clear lack of insight into the concept of value, the ability for software to evolve, and a free market’s innate gravitation towards the best.
The Soundest of Money
Bitcoin possesses a unique palette of features that make it an excellent form of money. The most important is its true scarcity. Money needs to be difficult to create. If it’s not, it’s worthless. For example, banknotes (which incidentally are easy to create by those that hold the right keys) make use of elaborate security methods to make forgery as hard as possible.
Creating gold, meanwhile, requires a nuclear reactor, a lot of mercury, and a decontamination unit. Since gold cannot be produced by a central banker, it is clearly the sounder money than a bank note or onscreen visualisation of a dollar in your bank account.
That said, there are no accurate estimates as to how many tons of gold are left to mine on earth. There is known to be masses of the stuff at levels deeper than current excavation techniques will allow extraction of. With no real knowledge of the quantity down there, there is no telling the rate at which gold will be mined when mining technology improves.
On the contrary, both the total supply and its release rate are hardcoded into the bitcoin network’s ruleset. These rules are reinforced by the largest pool of processing power the planet has ever known. There is no way that more bitcoin can be created to inflate this supply.
In terms of sound money, neither fiat currency or gold can come close to bitcoin. It’s a completely open network that anyone can participate in across the globe, whilst allowing for the transfer or billions of dollars’ worth of value across the globe in minutes and in an incredibly secure way.
Bitcoin outperforms the former most sound money the world had every known in just about every respect. It has a known supply, is highly divisible, can be transferred and stored for very little expense, and requires no permission to participate in.
What is Value?
Fans of shiny metals will often retort that bitcoin is not backed by anything and therefore cannot be valuable even if it does do what gold does and better. They will say that gold has historic precedence as a store of value and medium of exchange. However, people have used many things as money prior to banknotes. Gold emerged from millennia of experiments as the global reserve currency precisely because it is difficult to extract, and impossible to profitably create.
Gold wasn’t adopted as a store of value because of its nominal use in creating electrical components, nor was it thanks to the fact that it can be delicately shaped into elaborate shapes to adorn the bodies of the affluent. It has been used a store of …read more
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