The corona virus pandemic has exposed several of the great myths of today’s global society. The strength of the economy and international trade, the non-authoritarian nature of power, the resilience of the markets, the capabilities of technology. However, none of the great stories of mankind at that time was as badly affected as money, an issue that directly affects Bitcoin and that prompted me to write this text.
Some have warned that if things go on as before, the money will soon be a joke. Even the almighty dollar. And despite the fact that the United States can afford to spend new money without suffering the economic rush of countries like Zimbabwe or Venezuela, these measures are beginning to penetrate confidence in the currency, a bad symptom if we do that Sign welfare consider monetary policy, its economy and its institutional nature and its impact on the global economy.
The central problem (and the problem I want to address) is the perception that people have and will have about their own money. I will comment on three elements that seem fundamental to me and that, in my opinion, can be used to evaluate the properties of Bitcoin in perspective.
First, the progressive disappearance of physical money; then the possibility that banks can collect debts from their customers directly on the stimulus packages received, in order to finally comment on what was said at the beginning: if sluggishness persists, money could become a joke for citizens. Living in a hyperinflationary economy is a process that I experienced firsthand.
A cashless society
If we stick to its functional definition, we must achieve three basic goals. Function as a store of value, medium of exchange and unit of account. For much of modern history, these functions had been accomplished through physical instruments (shells, teeth, stones, precious metals at that time, now banknotes and coins) issued by central banks and the operation of more sophisticated instruments such as promissory notes, checks, and the like The rise of technology to digital payments.
Traditionally, the use of physical money is often associated with the idea of cash, but this is not a necessary requirement. “”The term can also be used to indicate money in bank accounts, checks, or any other form of currency that is easily accessible and can be quickly converted into physical cash.“”
However, in the midst of the coronavirus pandemic, a disease that is transmitted through the mucous membranes and can spread in this type of money, it is not advised to use cash. From burning banknotes in China to open criticism of banknotes as a vehicle for disease (and also COVID-19), the world today seems to be fully digitizing cash.
Digitizing money, however, would not just eliminate physical money. In fact, the idea of cash for this type of money and its business would no longer be entirely meaningful. Because it is mediated entirely by payment service providers and the infrastructure for executing them, the success of this type of operation depends entirely on trusted third parties.
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In an increasingly digitized environment, our money will be increasingly under the control of external agents. This is something that the first cypherpunks and crypto-anarchists had foreseen, and as we’ll see later, it was one of the big triggers for Bitcoin creation.
Therefore, let us make it clear that a cashless company refers not only to physical money, but in particular also to the complete dependence on third parties in order to guarantee the exchange of values, with the corresponding elimination of the anonymity of this kind of transactions, since every user of completely digital money must adhere to identification processes in order to be able to use these services.
Let us continue with the commentary on physical cash and its disappearance in the USA, which was published in the weekly Politico analysis: “There is also an ideological component: One of the strengths of cash is that it is generally accepted and difficult to track An almost anonymous way for Americans to donate to their favorite church, for example, or live as a persecuted minority, or to support a dissident group. “Some of us are still using cash because we think nobody is concerned.”
The danger of the mediator
But the pandemic has brought extraordinary measures in which several governments around the world plan to deliver funds “directly” to their citizens. The United States, France and Canada are just a few examples of this policy, which is designed to help people who are in need or who have a precarious economic situation due to the pandemic.
In the case of the United States, the Donald Trump government has previously reported that many citizens will receive a $ 1,200 “stimulus” check that some speakers believe should be enough to live three months.
However, one of the biggest setbacks that banking brings with it is occurring. And when we use third party services, we expose ourselves to the censorship of our funds, however What would happen if we were indebted to the bank itself?
According to David Dayen’s report, some of these institutions have already withheld these criminals’ funds. Bear in mind that over 26 million citizens in the United States have submitted to the employment agency. Therefore, it is possible that the number of people with overdrafts or without funds to keep accounts has increased. It is clear that many of the recipients of these funds really need them.
“Banks would be the first to receive payments to compensate for a late loan or overdue fees. Even if the person believes that their account with this bank is closed, the bank could use them to cover old debts if the payments are recorded there, “said Dayen. The intermediary’s risk is real and this is its consequence.
Therefore, not only is it advised against the use of cash, which gives priority to digital payments and digital money in general, but it is also managed by institutions that can unilaterally decide that we are not entitled to “what” corresponds to us state care plan. With more than 26 million new unemployed, the threat to the well-being of society is real.
Money is a joke
The way it works today, global money is based on trust and coercion. Fiat money not only requires the trust of its users (trustees), but also includes the decree of an authority on the value of this money and the exercise of power that makes it possible to implement the promise of this value. The pandemic has prompted many to appreciate the tremendous economic effort that will be needed to overcome it.
The pressure of billions of dollars raises doubts as to whether this strategy is sustainable over time. People also wonder why they pay taxes when new money can always be printed. They question the usefulness of these measures and see themselves in dangerous but very contemporary mirrors such as in Venezuela and Zimbabwe, where economic mismanagement and the indiscriminate supply of liquidity and money supply pulverized the local currency symbol.
“”These numbers are so large that they no longer matter; They are just abstractions. It has been some time since people have thought about the concept of money and its purpose. The general idea is that money has value, but that value is not arbitrary, ”wrote Jared Dillian in a Bloomberg opinion column.
Under the title “Money Loses Its Importance”, Dillian reveals the dangers of undermining the trust of money and that if she is a trustee and Fiat, she remains by decree only one unit of account, as is the case in Venezuela and Zimbabwe.
Even if American money may not reach these devaluation levels, it is important to maintain the perception that exists about it; that its users rate it positively and ignore these possible effects.
“During the economic crisis in Venezuela, we saw pictures of ordinary Venezuelans throwing their useless bolivars onto the street. This happens when money has lost its meaning; there is a risk of becoming a commodity if it is a scarce resource There are a million reasons why the United States will never have the same fate as Venezuela, but you still don’t want to change people’s perception of the value of money, after people throw away a few trillion dollars, they start to believe that everything is a great joke, ”said Dillian.
It is clear that it would be very difficult to see the US economy in Venezuelan terms. However, as we have seen so far, it is the problems associated with money or the fall of some of its great myths that would worsen the situation, especially when there is apparent apathy to politics worldwide and a constant disbelief in political leadership. It seems that the crisis has exposed more than one government.
How does bitcoin get into all of this?
The answer to this question about the role of Bitcoin can be found in the White Paper itself, published in 2009 by Satoshi Nakamoto. The exchange of this type of 100% digital fiat money is based entirely on trust (and the threat of punishment or taxes) and entirely on the responsibility of a third party, which exposes us to the risks we have already discussed.
“Internet trading is based exclusively on financial institutions that serve as trustworthy third parties for electronic payment processing. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model. Completely irreversible transactions are not really possible because financial institutions cannot avoid mediating disputes, ”the document said.
As we can see, Bitcoin has a goal that has a full relationship with what has been described so far: The problems of cashless societies, mediation, extreme trust (and misuse) in the idea of Fiat money inspired a large part of the Cypherpunk projects.
The ethos that created Bitcoin was created with this idea after several attempts failed, so its response is radical and haunting: Bitcoin suggests solving these difficulties through a decentralized type of money that really enables P2P exchanges and is resistant to censorship.
Just as the process of digitizing a variety of human behavior processes could encourage the introduction of new means of payment or investment instruments, the ultimate conversion of money into a digital good is perhaps the strongest argument that we could accept, may the topic become popular, mainstream. That, its radical censorship, its independence from central authorities and of course its scarcity in the face of the indiscriminate creation of a new mass of money.
It should be said that it seems – perhaps not for these reasons – but BTC’s option is being appreciated by more and more people at this moment. According to Google Trends, the search for “bitcoin halving” has increased with the approach to reducing mining premiums, as has the investment in resources that some US citizens have received.
At least, this suggests data released by Brian Armstrong, CEO of Coinbase, one of the most popular cryptocurrency exchange offices in the United States. The latter shared information indicating that the platform has received multiple deposits of $ 1,200, an amount that fully matches the stimulus package per citizen that the Trump administration would have agreed on.
– Brian Armstrong (@brian_armstrong) April 16, 2020
The economic incentive in Fiat went directly to a different type of money, a different paradigm.
It remains to be seen whether this will become a general trend and what the consequences could be. Would the United States government or a government accept that its citizens choose to bet directly on cryptocurrencies rather than on their own money? Would you be willing to give up the control you’ve had for centuries and make the pandemic faster now? And if yes, Is the network ready to receive a large number of new users and transactions? Does a second layer solution offer an option? And what about other blockchains?
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At the moment, the clearest thing is that a new block is created every 10 minutes and a new amount of bitcoins are issued without a break, which works over 99.8% of the time.