At the start of this year, co-founder of Twitter and CEO of Square, Jack Dorsey states that bitcoin would become the world’s “single currency” in the next 10 years. The remarkable thing about his comment is not the fact that he was overconfident but also the idea that bitcoin might be important for something other than predicting investment.
Basically, in spite that the cryptocurrency drama has caught the attention of the financial world in the recent year, the “currency” part of cryptocurrencies has dropped in valued generally. As a Goldman Sachs executive noted last year, Bitcoin is presently more of an asset than a currency – it’s something people use as an exchange, similar to stock or bond, instead of something they trade for goods and services.
That opinion is more realistic. The number of bitcoin exchanges has been down in the past couple of years and according to a recent academic study, half of those exchanges are linked to criminal activities. In terms of exchanges, bitcoin is still the same as it was back in 2010: this is an amazing compliment to the surviving monetary system, which is purposely important to people who want to dodge legal authorities or stay in communities that are frequent y inflation.
Nevertheless, the fantasy that cryptocurrency could become the next fiat money, wherein the supply of money is determined by government-run central banks, is still a crucial part of bitcoin’s request. The assurance is of a system where the government does not have control of the money supply and the currency which people use will be determined by the market competition. What will happen if this were to come true?
The only answer to that is: not pleasant. Fiat money governs our economies and financial system, and they depend on the central bank’s control of the currency to assist the business cycle, get rid of unemployment and handle financial price. If bitcoin were to become the superior currency, we will experience a more unstable and rigid currency, where the government will have very little power to get rid of slumps and once financial chaos is to begin, will be very difficult to stop.