Bitcoin has always had the potential to become world standard for money. Even if the blockchain that powers Bitcoin lacks the bandwidth to take care of the required transaction volume, as well as if the planet wasn’t ready 11 years back for non-governmental e-money to go conventional, the potential was always there.
Indeed, Bitcoin enthusiasts and developers have long insisted the day can come when Bitcoin will stand alongside gold. Back in 2018, Jack Dorsey, CEO of Twitter and Square, emphasized that Bitcoin would become the world’s single currency.
What the visionary, Milton Friedman, predicted about Bitcoin in 1999.
Even before Bitcoin became a reality, visionaries like Milton Friedman were predicting the rise of an internet-version of cash, as way back when as 1999. “The internet is going to be one of the major forces for reducing the role of government,” that he said during the time. “The one thing that’s missing but will soon be developed is a reliable e-cash, a method where you can transfer funds on the internet without A knowing B or B knowing A.”
The statements of Milton Friedman are precisely why finance commentators like Vice News producer and The Wisdom of Crowds author James Surowiecki have now been so skeptical about Bitcoin going conventional. “Our economies and financial systems are built around fiat money, and they rely on the central bank’s control of the currency (and the government’s ability to issue debt in that currency) to help manage the business cycle, fight unemployment, and deal with financial crises,” Surowiecki wrote in spring 2018 when Bitcoin hype was peaking.
Can Bitcoin be the dominant economic currency?
“An economy in which Bitcoin was the dominant currency would be a more volatile and harsher economy, in which the government would have limited tools to fight recessions and where financial panics, once started,” he continued, “would be hard to stop.”
Yet, two years later, the signs are positive that the significant disruption of the novel coronavirus could do what nothing else did so far: give Bitcoin the additional push to become accepted as a reserve currency.
The macroeconomic moment we’re currently in represents a serious chance for Bitcoin use cases. Let’s take a look at a couple of key explanations why.
Corona is leveling the playing field
Set against long-lived currencies such as the dollar and the pound sterling, Bitcoin seems new and untested. But venerable fiat currencies are crumbling.
Currency collapse, needless to say, is nothing new – this all has happened before. As recently as 2017, if the Bolivar collapsed, many Venezuelans went on to consider cryptocurrency for his or her transactions. Before that, the Zimbabwean dollar and Argentine peso saw hyperinflation that prevented them from serving as valid currencies. The Icelandic krona suffered an identical fate from then on country’s financial collapse in 2008.
In hindsight, 1971, if the gold standard was finally abandoned, was the beginning of the conclusion for fiat currencies. For decades, central banks have reacted to economic threats by printing money and lowering rates of interest, slowly developing a massive debt bubble that eventually caused the 2008-9 crisis.
Despite warnings, their strategy hasn’t changed, leaving fiat currencies over-inflated and willing to pop.
The coronavirus crisis brought a substantial economic shock these currencies can’t withstand.
We are seeing sudden slashes to both supply and demand and cuts to international trade which has brought the global economy almost to a standstill. In response, the US Federal Reserve, the Bank of England, and the European Central Bank (ECB) all increased their quantitative easing plans and brought rates of interest down further to 0% (or below, in the case of ECB and Japan).
In the absence of the gold standard, it’s unclear what fiat currencies have reduced value against.
We may also argue which they reduced value against Bitcoin since it reflects the true market value of currency at any moment. Some hardcore proponents, such as the author of Rich Dad Poor Dad, declare that it’s the only true hard money.
CORONA CRISIS great for GOLD SILVER BITCOIN. US gov printing $10 trillion in FAKE US $ to truly save US. FED printing $10 trillion to truly save SHADOW Banks. Dollar in BULL market for now. When $ BEAR market begins GOLD SILVER BITCOIN parabolic. Best investments today. DON’T MISS OUT.
— therealkiyosaki (@theRealKiyosaki) April 15, 2020
While that insight into the issue is scarcely accepted universally, Bitcoin is increasingly seen as “harder” than fiat currencies which are manipulated by central banks.
Indeed, if Bitcoin’s resistance to central bankers’ manipulations is what once managed to get seem impractical, today, that stand appears like much more of a feature than the usual bug.
With fiat currencies in disarray and central banks on the trunk foot, we’re likely to see either a go back to old financial ideas perceived as safe and stable, such as the gold standard, or the acceptance of radically new ones like Bitcoin which no more appear unattractive.
When the internet rules, e-cash is king
Up till now, the decentralized nature of Bitcoin was one of its disadvantages. It was seen as chaotic, disorganized, and unreliable without any one officially “in charge.” The current period shows the manipulation of interest rates and quantitative easing measures — together with the ramifications of the coronavirus. All of those produce a prolonged period of artificial deflation, or worse, stagflation, decentralization could become a secured item rather than a drawback.
Friedman, whom I quoted above, presciently linked the rise of e-cash with the central role of the net in governing our lives. Once the net rules, his argument goes, we will trust the currency which it manages.
It’s just like the slow rise of email, which existed as a medium for communication since 1971 but wasn’t widely adopted before mid-1990s. Suddenly, trust rapidly increased until it became ubiquitous.
Bitcoin occupies a similar space. It’s an internet-based tool that’s been awaiting its time. You could say that 2009-2020 were Bitcoin’s shadow years, just as 1970-1990 was that era for email. And we’re already seeing the tide start to turn.
The critical role that Bitcoin plays.
We is able to see this from the increasingly important role that Bitcoin plays, not merely as a currency, but as a trustworthy agent in on line interactions. The concept has been building and maturing slowly. And, UX has improved eventually.
As digital currency spreads and becomes more stable, it’s turned into the inspiration for dapps. RSK, for example, uses Bitcoin as the inspiration for an intelligent contract platform, easing people’s ability to put it to use for transactions. RSK could be the first open-source smart contract solution to have now been built on Bitcoin’s network, and the platform in addition has rolled out powerful interoperability capabilities.
Bitcoin’s advantages to Ethereum.
“We believe being able to offer Bitcoin’s benefits to Ethereum users and to connect these respective developer communities is a crucial step for the blockchain ecosystem as a whole,” RSK Strategist Adrian Eidelman told the press in February.
Another example could be the recent acquisition of the favorite Taringa! Social network by IOV Labs, the company behind RSK. There are ambitious plans up for grabs to introduce Bitcoin transaction capabilities, to decentralize social media marketing data storage, and to reduce steadily the monopoly of global internet corporations such as Facebook.
The decentralizing move has a lot in normal with Dorsey’s recent statements about his goal to decentralize Twitter’s tech infrastructure over time ahead, via a project codenamed Bluesky.
At the same time frame, Atomic Loans is investing in developing a decentralized finance marketplace for Bitcoin DeFi-backed loans. Such advances are fast bringing Bitcoin to become a versatile, widely-accepted currency.
Success breeds success
Bitcoin is looking at the threshold of widespread adoption as a reserve currency, and its particular diversifying use cases confirm this.
The currency is increasingly used for P2P lending and contains improved cross-border trade as it removed the need to proceed through exchange middlemen. Dorsey is one of the recent investors in Lightning Labs’s project to build a brand new protocol layer to increase and lower the cost of Bitcoin transactions, while his Square Cash App is rolling out payments in Bitcoin, and Money on Chain is developing a DeFi platform to serve as the foundations of a DeFi ecosystem for direct financial interactions.
We’re looking the future hard in a person’s eye.
These and other crucial steps are establishing Bitcoin as a viable, stable means for payment. We anticipate that it’ll soon be adopted by central banks as a reserve hard currency, along with their existing fiat currencies and gold stocks. In the temporary, governments could even create their particular Bitcoin to keep control on the currency, but Bitcoin depends on decentralization, and in the long run, it will continue steadily to evade governmental control.
A new bitcoin utopia could be along the way.
We still haven’t reached Bitcoin nirvana, nevertheless the signs are promising for long-term Bitcoin believers. Fiat currencies have long been losing their appeal, after decades of overprinting money and dragging down interest rates. As they crumble, Bitcoin’s star rises.
The corona-triggered recession is only the pin that popped the fiat currency bubble.
Simultaneously, the more projects and platforms built on the trunk of Bitcoin DeFi, the more trust in and familiarity with the currency increases, setting it up for adoption as a reserve currency in 2021 and beyond.