Bitcoin: Currency of the Future
Since the dawn of time, technological advancements are what separate humans from other intelligent beings. From the cotton gin to the self-driving car, year after year, humankind continually proves its intelligence by creating the next breakthrough technology. The next big thing is Bitcoin. Bitcoin is the currency of the future because current money is outdated. Bitcoin fixes the issues of modern money, and it will help break the chains from the current financial institutions.
Americans have used the conventional money system since its inception, so what’s wrong with it, and why is Bitcoin better? There are many reasons why Bitcoin is better than traditional cash, but to answer that question, one must understand the background of both.
The dollar bill is the current medium of exchange in the United States. Before the dollar bill, people used goods or services as a means of exchange. People traded things like livestock, silver, or some type of service. In the year 1690, Americans' first began to print money to “cover costs of military expeditions”(Mnuchin 2). Traditional cash has been around for quite some time. Throughout history, the United States’ currency was backed by many different goods. In the 1930’s the dollar bill was backed by gold, so for each dollar, there was an equal amount of gold to back that dollar. However, since the gold standard was abandoned in 1933, the dollar bill is technically worth whatever amount the government says it is worth. According to the US treasury, “the average cost of a note is 10 cents”(Mnuchin 1). The government fools people into believing that the value of 10 cents worth of paper and ink as actually worth $100. The U.S. dollar is an illusion of value that is that backed by the government.
To help understand what that Bitcoin revolution is, here is a brief background. Bitcoin was created in January of 2009 by a man named Satoshi Nakamoto. Nakamoto’s vision for Bitcoin was a peer-to-peer electronic cash system. Unlike the U.S. dollar, Bitcoin is worth as much as the people say it’s worth. There is a fixed number of coins that will be created making it a limited resource. This is comparable to gold. Since the inception in 2009, Bitcoin has gained popularity each year for many reasons. Before word got out in 2009, $1 could buy up to 1300 Bitcoins, but today it costs $15,000 to purchase just one Bitcoin. People have seen the potential that Bitcoin possesses, so it has gained value based on what the people have decided. By the year 2014, a whopping 3 million people owned Bitcoin. Although it is unknown how many people are using the network today, 2017 is the peak of popularity for Bitcoin.
As the world approaches the digital era, conventional money becomes more outdated by the second. One might ask, what are the downsides to the dollar? First of all, cash creates an opportunity for counterfeit money. This has always been an issue in the United States. In an article written by an economist, readers learn that “1/3 of all American currency was counterfeit”(Zeveloff 4). In 2012, it was said that there was an estimated “$220 million in counterfeit cash is circulating in the U.S.” (Zeveloff 1). Counterfeiting is an increasing trend, and technological advances make it easier for counterfeit notes to pass off as a real dollar. People must realize that counterfeit notes are an issue because “as the number of counterfeit notes in circulation increases, the real currency notes are devalued” (Donath 2). The definition of inflation is the decrease in the purchasing value of money. The value of money is constantly going through a cycle of inflation because of things like counterfeit notes. This brings up another issue with the dollar bill; inflation is fueled by the printing of money by the federal reserve. The federal reserve prints, “approximately 24.8 million notes a day with a face value of approximately $560 million” (Mnuchin 2). As more money prints, the hard-earned money that Americans worked for is worth less and less each day.
Bitcoin fixes the issues that the dollar bill presents. For starters, Bitcoin is impossible to counterfeit. The technology that runs the Bitcoin network has a unique code that eliminates counterfeiting. This advantage alone makes Bitcoin a good store of value. Bitcoin’s most important characteristic and the thing that makes it different to conventional money is that it is decentralized. Decentralization means that no single institution controls the Bitcoin network. An article written by a Bitcoin expert explains that “one central authority can not tinker with monetary policy and cause a meltdown”(James 2). This characteristic is important because unlike traditional money, no government or institution can create a Bitcoin out of nowhere. The people get to choose the value of the Bitcoin and therefore are no longer under the reign of government. Another thing that makes Bitcoin so valuable is that “only 21 million bitcoins can ever be created”(James 12). This rule makes the coin a limited resource. Because of these characteristics, Bitcoin is technically inflation proof.
Along with the issues that Bitcoin fixes, it is also a way to break the bonds of traditional financial institutions. Today, the most secure way to save money for the future is through a savings account. Since the banking crisis in the 1930’s, Americans have little trust in banking institutions. Banks also offer minimal interest rates for holding on to someone's money when in fact they are loaning out the money for way higher interest rates. Bitcoin is a storage value, so instead of losing value when the government decides to print more money, the price of Bitcoin goes up. Also, unlike the banks, Bitcoin is entirely transparent. The entire Bitcoin ledger is open to the public. With Bitcoin, Americans can break the cycle of greed and control that the banks hold in the current financial system.
Although Bitcoin technology has many advantages over cash, there are a few downsides to the digital currency. For starters, people argue that Bitcoin is a waste of resources. For Bitcoin to work, many computers must be on to keep the network running. In an article written by Abigail Beall, readers find out that the “Bitcoin Energy Bill Matches Ecuador’s” (3). The network uses an insane amount of the world’s energy, especially considering that the alternative, cash, cost little to no energy once printed. Energy usage will only increase from here on out by as by “July 2019, the bitcoin network will require more electricity than the entire United States currently uses” (Beall 3). The energy crisis is a valid argument, but soon the majority of the energy used will come from renewable energy sources. Scientists predict that by the year 2050, most, if not all, of Earth's energy will come from renewable resources.
Along with the energy crisis, others also argue that the price of Bitcoin has risen so drastically that, based on modern historical economics, there must be a crash in price. However, the economics on this subject is not so simple. Modern economics is based on a time where digital money did not exist. Bitcoin was created recently, and, over time, Bitcoin has created a new type of economics. One reason why Bitcoin remains popular, amidst the doubter, is that most of the issues that Bitcoin poses will be fixed throughout the adoption process. In the end, the endless possibilities of ways that Bitcoin can improve society outweigh the downsides.
With Bitcoin, Americans can finally break free from their current financial situation. Bitcoin is hands down the best alternative to conventional money. Although Bitcoin has some issues at the moment, its current benefits and limitless possibilities outshine its cons. Bitcoin is the next big thing, and everyone should jump on this bandwagon.
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