Patience, Bitcoin Will Overcome the Pushback from Banks and Governments
Fact: Insurance companies, hedge funds, and banks are
primarily credited for the 2008 financial crisis that rendered over 861,664 families homeless in a year.
The foreclosure filings in 2008 totaled to 3.1 million issues, translating to
one issue per 54 households.
As the fallout intensified, Satoshi released “Bitcoin: A Peer-to-Peer
Electronic Cash System” aggravated perhaps by the damage the financial
system had done to the economy. His peer to peer crypto currency would bypass
the middleman, breaking the yoke banks and governments had placed on the
But the world had been bonded for 38 years….
This is What Nixon Started—Gold Standard, Anyone?
Bitcoin’s first block went live in early 2009, as
governments prepared bailouts for banks globally. The global financial system
is built around fiat money. Central banks control fiat currencies, as their
governments deem fit.
Since the 1800s, Gold had been established as the only value
determinant for paper currency. The gold standard ensured that governments only
printed as much money as the gold they had in their vaults. Nixon’s government
dropped the gold standard in 1971, and governments set to printing their
currencies in bulk causing inflation. Venezuela and Greece are the latest
economies dealing with the consequences of this fallout.
While dropping the Gold standard fueled economic growth,
assets were also overvalued amongst other financial vices, causing challenges
of liquidity. Eventually, the piling on of debt to feed the growing economy
ballooned causing the market crash.
Enter Digital Gold
While the gold standard has its limits, gold has always held
its title as a ‘safe asset.’ In fact, during the 2008 recession, while other
assets values dipped to below 80 percent of their former value, Gold only lost 30 percent of its value.
Bitcoin is primarily considered as digital gold because it is an excellent
store of value.
Just like Gold, Bitcoins are scarce. The number of Bitcoins
in circulation today, number 16.7 million, leaving only 4.3
million coins unmined of the 21 million Bitcoins that will ever be minted.
Bitcoins are durable too just as Gold is. Gold neither rots, corrode nor rusts,
and Bitcoins also cannot be altered or destroyed. Gold is interchangeable with
more gold as a Bitcoin equals another Bitcoin in value—not so much on block
Bitcoin over Gold
But better than Gold, Bitcoins are digital and very easy to
store. Gold has to be stored in vaults incurring extra costs of safeguarding it
and insuring it. Furthermore, Gold is also harder to move around, so its trades
could be limited. To trade with Bitcoin all that is needed is a digital wallet
and unlike gold, Bitcoins can easily be divided to up to 8 decimal points of
Bitcoin has a few technical challenges that It needs to
address, but it is a system that could work much better than the Gold standard
that banks were built on. The bitcoin
system though would curb inflation since central banks wouldn’t print money on
Bitcoin as the First Truly Global Currency
Jack Dorsey, Twitter’s co-founder, has declared that
Bitcoin is set to become the currency of the world in a decade. Banks and
governments would beg to differ. They love to paint Bitcoin as a currency fit
for money launderers and drug peddlers.
These two institutions have been part of many financial
scandals and even more painful economic tribulations to point fingers at
Bitcoin. A largely bitcoin bearish bank, Danske Bank, for example, has recently
been accused of involvement in an over $235 billion money laundering scheme.
J.P Morgan’s Jamie Dimon’s once described Bitcoin as stupid
and currency for criminals. J.P Morgan has recently been found guilty of breaching
money laundering laws and have a $2 billion fine for it.
The Cause of Negativity?
The negativity that banks have over Bitcoin is
understandable because Bitcoin signals an end to their revenue sourced from
cash, ATM fees, and credit card transactions. Bitcoin’s transactions cost is
minute, and with a digital wallet, the currency can be used to trade, anytime,
With people relying on digital wallets, banks will have no
deposits to fall back on as sources of huge interest margins. Bitcoin use would
spell doom for most central banks because Bitcoin is out of their control.
It, therefore, does not come as a surprise that the
governments of China and Vietnam, some of the bureaucratic governments in the
world have banned Bitcoin. Will Bitcoin overcome
the pushback from banks and governments to become the coin of the world? Most
probably; change is inevitable, all it needs is time.