Senator Cynthia Lummis (R-WY) has given a specific date for when her long-awaited crypto regulator bill will be unveiled. The legislation will help to sort cryptocurrencies under appropriate regulatory labels and federal jurisdictions. According to a tweet from the senator on Friday, the final version of her bill will be released on Tuesday, June 7th. Lummis has spent months working on the bill alongside Senator Kirsten Gillibrand (D-NY), announcing it as early December 2021. The bill will reportedly provide sweeping…
The fiat monetary system currently in place is a “proven failure.” Paper money gets introduced into the system with high value, but as time progresses, the cash is overprinted, and it loses its value. For example, the US dollar, used as the fiat currency’s global standard, has seen a 1,934% inflation since the year 1800. The fiat has no intrinsic value, has an unlimited supply, and follows government regulations.
Bitcoin technology may be the liberator of international monetary systems. Due to its independence from government regulations, Bitcoin has proven immune to the current financial system’s flaws.
So, what are these challenges that are present in the current monetary system? And how can Bitcoin technology help to remedy them?
Challenges of the Current Monetary System
Although the existing monetary system has sufficed for centuries, several challenges stir its crudeness. Here are the challenges associated with the contemporary monetary system;
- Counterfeiting – This involves the making of a fake of a particular product. The above is common in the money circulation industry, with hardly any effort required to get sham currency.
- Low trust towards governments and the financial institutions – A tiny percentage of the world population have confidence in banking systems. That is because of the high payment charges in place for every transaction; thus, customers lose more in transacting fees.
- Money Laundering involves hiding the origin of a transaction or money generated from criminal activities, thus making them appear legitimate. Using hard cash in the current monetary system has encouraged money laundering for terrorism.
- Slow Transaction Processing – Due to many procedures of authorization for a transaction, the speed of processing transactions is low.
- Inflation – This is how prices of a specific commodity or service can change over time. It occurs when the supply of money in a particular economy overgrows the overall growth of the economy. That leads to excess cash in circulation, thus inflation.
The challenges named have been breaking down the monetary world for centuries. The flaws have led to financial instability in many countries and severe losses to individuals and companies.
How Can Bitcoin Solve These Issues?
Unlike the fiat currencies that don’t have proper mechanisms to address their challenges, bitcoin, a digital currency, is doing just that. How can bitcoin solve the issues to deal with the current monetary systems?
Minimal Chances of Counterfeiting
When completing any transaction on a blockchain, you don’t hand over bitcoin physically. Instead, you submit a transaction to the network that validates your address and completes the deal. There isn’t any exchange of physical currency, so chances of counterfeiting are minimal.
Although bitcoins are digital currencies, therefore prone to hacking, the coding system behind it makes it hard to counterfeit. If someone were to double spend bitcoin to falsify it, the blockchain would create two branches of the same transaction. However, the system will only accept the transaction that has been there longer, i.e., the real operation, and deletes the branched transaction.
Elimination of Financial Institutions and Governments as Intermediaries
These bodies set regulations that are supposed to guide the monetary system but which overcharge transaction fees. In bitcoin, however, the transaction fees are not fixed to a particular amount. These fees usually are paid to the miners to ensure faster processing and confirmation of your transaction. These fees depend on the amount a person doing a transaction is willing to pay for the deal’s faster processing.
No Money Laundering
There are no risks of money laundering in bitcoins. All the transactions go through a process called chain analysis. It’s easy to follow how clients change their assets to cash in the banking systems with blockchain.
When creating a new bitcoin, you have to create a blockchain that can be easily verified by the existing networks to give proof of work. Without evidence of work, the other systems block the transaction.
Faster Transaction Speeds
Unlike the current global monetary system, bitcoin transaction processing speed is fast. Transactions with the fiat systems depend on location, and the amount of money transacted there. If the amounts are colossal, then the transaction is always slower.
With digital currencies, users don’t have to fill out forms and get authorizations from bank managers. Customers can access payment service 24/7 by just accessing their wallets. That assures customers faster and easier transfer of assets. Bitcoin can process at least 3.3 transactions per second and fully complete the transaction between 10 seconds and 60 minutes.
Bitcoin is inflation immune.
As of 2020, Venezuela had an inflation rate of over 2000%, thus threatening its economy. However, bitcoins have been viewed by many as deflationary currency and can hedge against the inflation risks. There are only 21 million, thus enhancing the scarcity of bitcoin with increasing demand. That makes bitcoin resistant to inflation.
The introduction of bitcoin technology in the fiat system will ensure economies’ growth and the financial institution’s trust. Corruption, which is vast in the fiat system, will be a thing of the past.
Bitcoin technology has, over time, proven to be one of the best innovations for the monetary system. Digital currencies’ immunity to inflation and government regulations makes them maintain their value. Other problems brought about by the counterfeiting of currency are efficiently dealt with in the bitcoin chain analysis system.
Bitcoin technology offers several advantages over the fiat monetary system. As the existing system is plagued with several challenges, perhaps it is time we all adopted a different way of doing things. Bitcoin presents some unique features that make it stand out. Therefore, it may be the answer we have been waiting to solve the monetary system’s various flaws.