Bitcoin has always had the potential to become a world standard for money. Even if the blockchain that forces Bitcoin lacks the bandwidth to take care of the required transaction quantity, and even if the world wasn’t ready 11 years back for non-governmental e-money to go mainstream, the possibility was always there.
Indeed, Bitcoin fans and developers have long insisted that the day will come when Bitcoin will stand alongside gold.
What the visionary, Milton Friedman, called approximately Bitcoin in 1999
Before Bitcoin became a fact, visionaries such as Milton Friedman were predicting the increase of an internet-version of cash, as long ago as 1999. “The internet is going to be one of the significant forces for decreasing the role of authorities,” he explained at the moment. “The one thing that’s missing but will probably soon be developed is a reliable e-cash, a method where you are able to transfer money on the internet without A understanding B or B understanding A.”
“Our savings and financial systems are constructed around fiat currency, and they rely upon the central bank control of the money (and also the government’s ability to issue debt in that money ) to help handle the company cycle, fight unemployment, and also manage financial crises,” Surowiecki composed in spring 2018 if Bitcoin hype was peaking.
Can Bitcoin be the dominant economic money?
“An economy where Bitcoin was the dominant currency could be much more volatile and harsher economy, where the authorities could have limited resources to fight recessions and in which financial panics, after started,” he continued, “could be hard to stop.”
Yet, two years later, the indications are positive that the significant disruption of this novel coronavirus can do what nothing else has done so far: give Bitcoin the excess push to become recognized as a reserve currency.
The macroeconomic moment we are now in reflects a serious opportunity for Bitcoin use cases. Let’s look at a few important reasons why.
But venerable fiat currencies are crumbling.
Currency collapse, of course, is nothing new — this all has occurred before. As recently as 2017, when the Bolivar collapsed, many Venezuelans went on to embrace cryptocurrency due to their transactions. The Icelandic krona endured a similar fate after that country’s financial meltdown in 2008.
Actually, 1971, once the gold standard was eventually abandoned, was the beginning of the end for fiat currencies. For decades, central banks have reacted to economic dangers by printing money and lowering interest rates, slowly developing a massive debt bubble that finally caused the 2008-9 crisis.
Despite warnings, their strategy hasn’t changed, leaving fiat currencies over-inflated and ready to popup.
The coronavirus crisis brought substantial financial jolt that these monies can’t withstand.
We are seeing sudden slashes to both supply and demand and cuts to global trade that has brought the international economy almost to a standstill. In response, the US Federal Reserve, the Bank of England, as well as the European Central Bank (ECB) all increased their quantitative easing plans and brought interest rates down even further to 0 percent (or below, in the event of ECB and Japan).
From the absence of the gold standard, it’s uncertain what fiat currencies have decreased value against.
We could even argue that they decreased value against Bitcoin because it reflects the true market value of money at any given time. A few hardcore proponents, for example, writer of Rich Dad Poor Dad, assert that it’s the sole real hard money.
While that penetration into the matter is barely accepted, Bitcoin is increasingly seen as”harder” than fiat currencies that are manipulated by central banks.
Indeed, if Bitcoin’s immunity to central bankers’ manipulations is what once made it look impractical, now, that stand seems like much more of a feature than a bug.
With fiat currencies in disarray and central banks around the rear foot, we are very likely to see either a return to older financial ideas perceived as secure and stable, like the gold standard, or the approval of radically new types such as Bitcoin which no longer seem unattractive.
When the internet principles, e-cash is king
Up till now, the decentralized nature of Bitcoin was one of its drawbacks. It was viewed as chaotic, cluttered, and unreliable with no one officially” in charge.” The present period shows the manipulation of interest rates and quantitative easing measures — together with all the impacts of the coronavirus. All of these create a protracted interval of artificial deflation, or worse, stagflation, decentralization can become an asset rather than a drawback.
Friedman, whom I mentioned previously, presciently linked the rise of e-cash with the fundamental role of the internet in regulating our lives. When the net principles, his argument goes, we will trust the currency which it manages.
It’s similar to the slow growth of email, which originated as a medium for communicating since 1971 but wasn’t widely adopted until the mid-1990s. Unexpectedly, trust immediately increased until it became ubiquitous.
Bitcoin occupies an identical space. It’s an online tool that’s been anticipating its time. You might say that 2009-2020 had been Bitcoin’s shadow years, as 1970-1990 was the age for email. And we are already seeing the tide start to turn.
The crucial role that Bitcoin plays.
We can see this by the important function that Bitcoin plays, not just as a currency, but as a trusted agent in online interactions. The concept has been building and maturing gradually. And, UX has improved with time.
As digital money spreads and becomes more stable, it’s turned to the foundation for apps. RSK, as an example, uses Bitcoin as the foundation for a smart contract stage, easing people’s capacity to use it for trades. RSK is the first open-source smart contract strategy to have been assembled on Bitcoin’s system, and the stage has also rolled out powerful interoperability capabilities.
Bitcoin’s benefits to Ethereum
“We believe having the ability to offer Bitcoin’s advantages to Ethereum users and also to connect these various developer communities is a crucial measure for its blockchain ecosystem as a whole,” RSK Strategist Adrian Eidelman told the media in February.
Another example is the recent purchase of the favorite Taringa! Social networking by IOV Labs, the company behind RSK. There are ambitious plans on the table to introduce Bitcoin trade skills, to decentralize social media information storage, and also to reduce the monopoly of global internet corporations like Facebook.
At the exact same time, Advances is investing in building a decentralized fund marketplace for Bitcoin DeFi-backed loans. Such improvements are fast bringing Bitcoin as a flexible, widely-accepted currency.
Success breeds success
The money is increasingly used for P2P lending and has improved cross-border trade as it removed the need to go through trade middlemen. Dorsey is among the recent shareholders in Lightning Labs’s project to build a new protocol layer to accelerate and reduce the price of Bitcoin trades, while his Square Cash App is rolling out obligations in Bitcoin, and Cash on Chain is constructing a DeFi platform to serve as the foundations of a DeFi ecosystem for lead financial interactions.
We’re looking for the future difficult at heart
These and other vital steps are establishing Bitcoin as a workable, secure method for payment. We expect that it will soon be adopted by central banks as a book hard money, alongside their existing fiat currencies and gold stocks. In the short term, governments might even produce their own Bitcoin to maintain control over the money, but Bitcoin relies on decentralization, and in the long run, it is going to continue to evade governmental control.
A brand new bitcoin utopia could be on the way
We still haven’t attained Bitcoin nirvana, but the signs are promising to get long-term Bitcoin believers. Fiat currencies have been losing their allure, following decades of overprinting money and yanking down interest rates.
The corona-triggered downturn is merely the snare that popped the fiat currency bubble.
Simultaneously, the more platforms and projects constructed on the rear of Bitcoin DeFi, the greater confidence in and familiarity with the money increases, putting it up for adoption as a reserve currency in 2021 and beyond.