Fourteen years after the launch of the Bitcoin whitepaper, the possibility of a change in the world’s predominant type of money looms.
- The fiat monetary system needs to be more efficient because it does not safeguard value.
- Bitcoin’s growth in 14 years shows the need for a new kind of money.
- The 14th anniversary of the Bitcoin whitepaper, the document published on October 31, 2008, presented the operation of the first cryptocurrency in history. This event, two months before the crypto asset was launched, has taught the world several lessons about money ever since.
Bitcoin has allowed us to see that the decentralized issuance of a currency and its free use globally without government intervention is possible. It has also taught us that its increased demand raises its price to the point of being worth pennies to thousands of dollars in a short time. The latter has made it attractive as an investment, but there are more.
The creation of cryptocurrency 14 years ago and the growth of its use have spread three lessons about money. Not only among the most educated minds in the economy but also among people from marginalized societies who fight against inequality and financial repression.
1. The current monetary system is not efficient
The current monetary system, based on fiat money, better known as “national currencies”, has a problem that affects people’s lives: it is not a safe haven of value. A currency’s objective is to use it as a transaction element to buy-sell products or services. Therefore, their prices mustn’t be devalued.
However, in reality, what we see is that fiat money has devalued over time. This is due to the policies of each country and the increase in ticket printing, which depends on each government on duty. Therefore, people lose purchasing power.
This does not only affect the currencies of emerging economies such as Argentina and Venezuela, which suffer wild devaluations. Even the US dollar (USD), considered “the safe haven of the world” for being the largest reserve of money, is worth less than its all-time high price achieved in 1985, according to TradingView.
The dollar index (DXY), which measures the value of the US currency, has been below its all-time high for 37 years. Source: TradingView.
Since then, it has stayed below with small rises that do not reach even half its maximum, like the one it currently has. Meanwhile, other currencies considered strong, such as the euro (EUR) and the pound sterling (GBP), fell to their lowest in decades in 2022, as reported by CriptoNoticias.
This panorama clarifies that the current monetary system is inefficient, but be careful. Don’t panic. We are not lost. Humanity has gone through different types of money throughout its history. Although now it seems natural to use national currencies, the truth is that it is only the predominant model of the last centuries.
2. Money can change
According to several historical records, various types of manufactured and natural objects, such as salt, gold and silver, have been used as money. That is, the fiat system has only sometimes been used. Even the national currencies we use today have mutated from paper bills to digital versions with the globalization of technology.
Likewise, in recent years, bitcoin, stablecoins (cryptocurrencies with parity to national currencies) and altcoins have appeared in the game. Since then, its adoption has grown to amass nearly $1 trillion in market capitalization as of this writing, according to explorer CoinMarketCap.
Bitcoin is the cryptocurrency with the largest market capitalization for a total of USD 397.142 million currently, according to records. Source: CoinMarketCap.
Faced with this constant evolution of money in history, Christine Lagarde herself, the current president of the European Central Bank in charge of issuing the euro, recently spoke about the need to update the current monetary system. For this reason, such a body is studying, as well as other central banks s, the possibility of issuing its own cryptocurrency called “CBDC”.
“If we don’t get involved in experimenting and innovating in terms of central bank digital currencies (CBDCs), we risk losing the role we’ve embraced for many, many decades [as centralized money issuers]. We have historical examples of moments where the central bank’s role as monetary anchor did not exist, and that caused several crises to precipitate (…). Therefore, we must respond to the demand for digital payments to maintain our central role.”
Christine Lagarde, French lawyer and current president of the European Central Bank.
This panorama demonstrates that the monetary system, as we currently know it, can change completely and is already beginning to do so.
This is demonstrated by the growing adoption of cryptocurrencies, as a payment method, money transfer and safe haven of value. In this sense, the 21st century and the next come with strong monetary changes anchored to the globalization of technology.
3. We are not free to use some currencies
The current predominant fiat monetary system in the world has one more problem, in addition to needing to improve due to devaluation over time. This defect is its centralized dependence that threatens individual freedom.
People not only do not have control over the decisions of each government in power and the central bank, which can cause their money to depreciate. In turn, they cannot buy certain currencies, move all their money freely, nationally or internationally, and keep their assets private.
This situation means that people do not have the freedom to use their money with autonomy and privacy, being tied to the central power of the day. That is why, in different parts of the world, the use of illegal entities for the sale and movement of money is widespread, as in Argentina with the commercialization of the “blue dollar” in the caves.
This impossibility of individual freedom over national currencies has led to the need for a new type of money. Hence the creation and growing use of bitcoin and other cryptocurrencies.
Unlike national currencies, bitcoin does not depend on centralized power. It is issued in a decentralized and limited way. In addition, its system allows each person who wants to have cryptocurrency autonomy and privacy and make transactions without government intervention.
In this world that evolves to have more and more human rights to freedom, the government’s limitation of money has no place. Therefore, if the use of bitcoin becomes widespread globally, or another superior alternative, we could see the end of the power of the State over money, just as in the past, the State was separated from the Church.