The international trade of goods made the world flat and now digital currency is doing the same to financial markets. A new currency with set limits of scarcity and an international medium of exchange has large potential to influence global economies. That new currency is Bitcoin. Money has advanced through numerous stages and today Bitcoin is heralded by many as the next evolutionary step in currency. Through hundreds of hours of research, contact with the leading Bitcoin service providers and my book Bitcoin: A Basic Economic Analysis of Everything, I have demonstrated the future proliferation of digital currency and how Bitcoin will have massive impacts on a global scale.
The introduction of Bitcoin into global markets creates currency competition in every market. When central banks usurped the control of the money supply they effectively created monopolistic control over currency. This turned the service of providing currency largely into a tool to reach political ends. The store of value quality of money was tarnished by central banks and the medium of exchange nature of money reduced home currencies to domestic use. Consumers received the short end of the stick in terms of the lost value of savings and the reduced purchasing power of their money, but had no choice besides investing in commodities. Bitcoin completely changes the dynamic.
Bitcoin can be purchased anywhere in the world and sent anywhere in the world. This international medium of exchange quality gives Bitcoin a competitive advantage over fiat currency, which requires to be run through international market exchanges to be transferred. This transfer process is completely anonymous and can’t be observed by large institutions or garnished by government. Thus Bitcoin makes world financial markets flat by providing a means to transfer wealth thousands of miles with the click of a button and no exchange.
Bitcoin provides a better store of value through a controlled currency supply with the effect being no inflation. Bitcoin faces a new economic phenomenon created by a fixed amount of Bitcoin: continuous deflation. Inflation is an effect of central banks increasing the quantity of the money supply as expressed by the quantity theory of money. Banks print and expand credit which increases the money supply, decreases scarcity and reduces the purchasing power of money. Bitcoin however lacks the erratic printing and provides consumers with the knowledge of future expectations. As the amount of Bitcoin remains a fixed number and population levels of users increase, the scarcity increases and the value increases. With the advent of Bitcoin consumers are given two choices worldwide: keep value stored in banks with fiat currency that won’t be worth tomorrow what it’s worth today or purchase Bitcoin which will gain in value. Competition results from a currency that outperforms central banks and threatens to replace central banks with improvements.
Government-run banks often have negative effects on economies. This factor has not been dealt with because alternatives and viable competitors haven’t been presented until now. Individuals worldwide become protected from the irresponsibility and value exploitation of central banks with the use of digital currency. Notably, third world countries can see immense benefits. Prosperity and economic growth depend on secure banking institutions, and third world countries are hampered from growth by bank inefficacy and failure. Bitcoin provides business sectors and individuals in third world countries secure methods of payment, money safe from hyperinflation and chances for prosperity. Replacing central banks with peer-to-peer decentralized currency systems would ultimately provide societies all across the globe protection from economic tyrants. Bitcoin holds the ultimate possibility of the separation of state and economics.
More than the purchase and trade, the new Bitcoin fanatics are keen on minting themselves. Many invest in hardware equipment like that from popular vendors as CoinMiningDirect or join the community crypto pools. Minting crypto through mining offers additional benefits with fiat currency as the users don’t have to exchange the cash, nor are the equipment any expensive.
By successfully competing with fiat currency and central banks the new crypto-currency Bitcoin creates the best competition and challenge to government-run banking that has yet been seen. Each day fiat currencies decrease in value and governments profit from this while consumers lose. Each day Bitcoin either retains an average level of value or gains in purchasing power. It is up to consumers to ultimately be the judge of which currency to use. Based on comparisons of currency standards alone, Bitcoin leads the race.