How is Bitcoin the future of money? Before buying or investing anything, it is wise to know what exactly you are going to buy. Bitcoin is the future of money. Or is it? It is way better than existing money as we know it, but why? Here’s a list:
- It is decentralized. There is no strawman in between. No bank or institution which is doing all the shady shit with your hard earned money.
- Sending money is instant (almost). 24 Hours a day, 7 days a week. Anywhere in the world. The stock market not trading on weekends? Ha, good one. Can still make money with Bitcoin.
- It is 100% digital. You’ve probably already experienced how great digital money works. No? PayPal maybe?
- Transparency. The Blockchain saves any transaction worldwide. Which means the merchant can’t take some shady bonus for the transaction done. Plus, money laundering is difficult.
- It is easy (somewhat). You can make a Bitcoin-Wallet for free in minutes. Doesn’t matter where you are, as long as you have Wifi.
- Cheap: Almost no fees. Even across borders.
- And the biggest advantage in my opinion: Ol’ granny at the supermarket doesn’t waste your time for picking out her small change money to pay for a magazine.
These are just a few reasons why Bitcoin is better than existing money (fiat). Another great feature is that the cryptocurrencies market pretty much behaves like the equities market. Just way faster. Which means you can make money by doing nothing.
If you are interested in how the market works exactly (works for equities as well), you should check out my post about market cycles.
First things first
The price for Bitcoin, and even worse for altcoins, is very volatile. It moves a lot and heavily. This is due to the fact that the market isn’t regulated really, so a lot of whales make big waves.
In other words, it is manipulated. More detail about that in my video here:
Not a big deal if you know it, so you can act accordingly. This might change in the future, so if anything, you should start now, if you want to make money. However, if you’ve already started and lost money, I wrote a guide on how to make your money back.
If you are not familiar with it already: Our financial system is inflationary. Inflation derives from a Latin word and is best translated into “swelling“. Which is true, because the amount of money in existence is constantly swelling or increasing.
Which means the money loses value every year. Because if there is more around, the existing things are less worthy. Currently, the inflation sits at around 2% every year. Which is the goal for the federal reserve to keep it around that number.
This has an effect: The economy HAS to grow every year. Because the value of money loses 2% every year, the economy needs to have a growth of at least 2% / year to break-even.
Ideally more than 2%.
A small inflation urges people to spend their money. Since it loses value over time, there is no point in hoarding it. Which makes it so much weirder that “saving money” is actually a “tip” for the standard citizen on how to get wealthy.
Because, that’s just completely wrong.
Actual “saving” money would be to invest it into something which has exactly the return for one year of around 2%. So you just cover the inflation. That way, your money didn’t lose value and it didn’t gain any.
However, economic growth is pretty much built into the inflationary system. Not only citizens but companies alike need to spend their money. Which in return boosts the economy again, etc etc.
Against the means
Bitcoin, however, is limited to 21 million Bitcoins. There will never be more than 21 million Bitcoins in existence. So you can’t print new ones, like you can with fiat money. Therefore Bitcoin isn’t inflationary. It is deflationary.
Now, what are the implications of that?
The value of the Bitcoin keeps rising.
If we keep printing Dollars, Bitcoin will naturally grow in value compared to the USD.
And there comes an issue with everything deflationary: why would you spend it?
You can see this being played out already. Nobody spends their Bitcoin. Since you’re much better off holding it. And not only due to price fluctuations like mad, or because “the technology isn’t there yet”. It’s because if you think far into the future, your one full bitcoin will be worth a shitton.
Depends on how far you plan into the future. 1 Bitcoin = 1 Bitcoin. If fiat money dies. What’s its value then? Depends on the buying power it has but does a system like that actually work?
At least not in general. The problem with deflation is, that people don’t spend their money. Therefore companies have to reduce prices for their products to acquire customers. This will reduce profits so it might not be profitable anymore at all.
What’s the result of that? Always?
Exactly. People getting fired.
More unemployment means less buying power for the citizens. Which means less incentive to buy stuff and we’re back in the vicious cycle.
This has happened multiple times throughout history. It usually happens in correlation with a market crash and/or depression. Because people are afraid to spend money since they don’t know what’s going to happen with the markets.
A depression has to always be fixed by hand. For example by introducing a new currency which is supposed to be stable. I don’t think there has ever been a case where a deflationary system cured itself. If you have info on that, please let me know.
A case for saving money
If your money keeps rising in value over time, you have no incentive to spend it. Except for things you need, like food. But might this actually be a good thing?
Right now we live in a consumer-based society. It is focused around spending as much money as you can. Buy all the shit there is.
But rich people already know, that you a) don’t really get rich that way and b) you don’t need half of the shit you’re buying.
So maybe this is a good thing? More or less forcing people to spend less on shit they don’t need, so they can actually enjoy what they have, instead of already thinking about the next thing to buy?
Do people actually want that? Are they aware they might need that for happiness? Can the whole of society just change like that or does it need a big catalyst, like a huge financial depression?
What do you think?
Tell me in the comments (no registration needed) or on Twitter.
Consent on not changing people
People don’t like change generally. So what about this: Treat Bitcoin like Gold and have it as a store of value. Not for transactions. This way the deflationary part is actually good.
Bring up another cryptocurrency which does not have a fixed supply, so you can keep your 2% inflation, even with cryptocurrencies.
Satoshi, along with the Bitcoin maximalists, will be furious about this. Queue the hate comments.
Are we wasting a perfect opportunity to finally change the existing system this way? Sure. Will changing the system ever happen though? Hard to tell.
Considering the fact that Bitcoin is global, but there are almost 200 countries, with multiple very different views and actions on money, this might play out completely different anyway.
Maybe it is what’s needed to finally change the world for good. So we can stop spending money on bullshit.
Tell me what you think.