Is Bitcoin Like Gold Or Fiat Money?
Bitcoin is no longer a future thing or the "next big thing." It is here and actively works to alter the global financial model as we have known it for the past century. It is the only possible natural progression to the form of money. In order to start your bitcoin trading journey, you may click here to register and use a reputable trading platform.
As you can see, the concept of money has taken several forms throughout human history, beginning with its introduction as an alternative to a barter system.
Precious metals like gold and silver meet the requirements. What if cryptocurrencies such as Bitcoin? Do they have features that make them valuable enough to be used as the primary form of money?
Now that we know what characteristics an ideal currency should have, we can quickly see how Bitcoin compares to fiat money and gold. We can quickly see how Bitcoin is not like gold but somewhat better.
COPYRIGHT_WI: Published on https://washingtonindependent.com/ebv/is-bitcoin-like-gold-or-fiat-money/ by William Willis on 2022-10-12T02:14:03.140Z
Humans have progressed from exchanging precious metals for goods and services to transferring money digitally with the swipe of a finger. It was all part of the financial evolution of human civilization.
Underlying principles, however, govern what can and should be considered money in an economy. People cannot use mangoes as a payment method, can they? (Though we should), it lacks some critical elements required to determine an asset's value. The scarcity of precious metals has primarily contributed to the relative importance of gold and silver over the centuries. In ancient times, they used to solve a problem. They were easily transportable, malleable into coins, had long shelf lives, and were generally superior to any other commodity to be used, as previously stated.
Bitcoin performs admirably in these areas. Blockchain is one of the most advanced forms of technology used in cryptocurrency.
Bitcoin is limited in supply, with only 21 million Bitcoins produced worldwide. It maintains its relative value in the same way that gold does. It is also secured, decentralized, and transactionally efficient. Bitcoin serves a purpose and is not present in financial systems only due to ancient practices.
Based on these and other factors, we can compare Bitcoin and cryptocurrency to fiat currency. Bitcoin is a limited currency, while the government issues other fiat currencies regularly. Therefore, Bitcoin is increasingly scarce and thus valuable. And this is also why the value of one Bitcoin with other currencies soars like a skyscraper.
A consistent supply of fiat currencies is required to avoid quantitative scarcity, but an excess supply causes their value to fall, resulting in inflation. People use a portion of this regular supply to compensate for damaged currency notes that render them unusable. Bitcoin does not have this problem because it does not exist in physical form.
Bitcoin and other cryptocurrencies are also secure. For example, Bitcoin operates on a decentralized ledger system where nodes check it for accuracy multiple times. The system approves a transaction if all nodes on the network approve it according to their records. And this means that the possibility of Bitcoin being counterfeit is nil.
Cryptocurrencies such as Bitcoin are currently gaining enormous value in anticipation of becoming the world's future form of currency. They have all of the advantages of existing currency forms, but they lack approval and regulation by world governments.
And this is not a simple task. Bitcoin was created in some ways to transfer power from the prevalent banking institutions to the people. The decentralized maintenance and transactions achieve the same result, but this nature makes Bitcoin challenging to regulate.