“Can Bitcoin help solve world economic problems?” This has always been a big question among crypto-enthusiast but had always received a cold response until now.
Currently, the economies of most major nations of the world are in trouble while some other nations are on the verge of crashing.
Central banks are taking extreme measures to prevent or tackle these economic problems and bail the world economies out. For instance, the US Federal Reserve (Fed) keeps injecting money into the financial system while central banks in Asia are employing their own tactics to ease the squeeze.
However, history has shown us that the common practices of increasing the FIAT money in circulation are never the answer – the 2007 economic recession is a good example.
On the other hand, Bitcoin is now gaining lots of interest from economic leaders and has raised some cogent and interesting financial and economic questions and one of them is whether Bitcoin can help with economic problems or not.
Note that: the world would face economic problems both during and after the COVID19 panic. However, these economic problems would arise more from a lack of production than from the fiscal and monetary policies central banks were adopting, like increasing money supply or printing money on a massive scale.
The answer to this great question is Bitcoin can help with economic problems [due to fiscal and monetary policies] and here are ways through which Bitcoin can help:
Bitcoin Separates Transactions from Fiat Money
Bitcoin does not in any way require any connection to FIAT money. For instance, Bitcoin can be used to conduct financial transactions in the global economy while, at the same time, avoiding the standing US economic policies.
Note that: Bitcoin is not a replacement to FIAT currencies. Otherwise, it will be subjected to the same failure and problem associated with FIAT currencies. But Bitcoin can focus on solving world economic problems while FIAT currencies persist.
Presently, the US dollars is the reserve currency for the global economy and enables more international transactions, and any problem with the US dollars affects most other countries.
However, using Bitcoin as a means of transaction will prevent the reliance on FIAT and monetary policies that may trigger economic problems. For instance, inflation, deflation, low purchasing power, etc. associated with FIAT currency will be circumvented or adjusted for when Bitcoin is used for transaction.
Bitcoin Encourages More Overseas Transactions
Overseas transactions are mostly affected by inflation rate and exchange rate of home currency. Hence people from nations with weak economies are at a disadvantage and may not be encouraged to engage in any overseas transaction. For instance, a country whose exchange rate is about 5000 to a dollar may not want to transact business in the US.
However, Bitcoin comes in handy to encourage people to conduct more overseas transactions. This is because 0.3 Bitcoin in the US is 0.3 Bitcoin in Nigeria and will buy goods worth 0.3 Bitcoin anywhere on the globe [eliminating their value in FIAT].
Within the last three months, especially due to the increasing rate of Covid-19 infection, about 287,492 confirmed cases of Bitcoin transactions were recorded daily worldwide. This is due to the lockdown and restriction caused by Covid-19’s rising infection cases.
More so, Bitcoin Transaction is secure, quite fast, confidential, and transparent.
Bitcoin Reduces High Reliance on Fiat Currency
In addition to the first point, Bitcoin reduces the high and unnecessary reliance on FIAT currency. Being a decentralized currency, Bitcoin is void of any political and economic issues – monetary or fiscal – typical of FIAT currencies.
The high reliance on FIAT currency is the major reason for economic problems. However, Bitcoin is specially designed to act as a perfect alternative for authorized or FIAT currency. Hence, using Bitcoin as a means of transaction or payment can reduce the reliance on FIAT currency.
People who have been using Bitcoin as a means of payment and transaction claimed that they enjoy the same level of security as FIAT currency.
Bitcoin Emerges New Market and Eliminates the Barriers to Entry into the Market
By its nature, Bitcoin builds a global network of decentralized transactions that eliminates the need for any centralized institutions for currency issuance or settlement.
As a result, Bitcoin opens the door to a new type of market opportunity where no single individual or authority can control the money market. Hence, instead of persuading the banks and financial institutions, investors and business persons can bypass the central authority and their regulations for their prospective project through Initial Coin Offerings (ICO).
Thus, Bitcoin will open new market opportunities that can contribute to sustainable economic growth and development in the global economy.
Bitcoin Has an Increased Transparency of Transactions
Bitcoin does not involve any shady transaction but transparent transactions. All Bitcoin transactions are automated and digitized and are all tracked in a distributed ledger.
More so, Bitcoin transactions cannot be manipulated by anybody. This greatly eliminates the risk of corruption or fraud. Hence, nations with underdeveloped economies have a greater opportunity of entering into financial transactions with other countries to boost their economy and social prospects.
Also, with Bitcoin, citizens will be able to keep track of where and how state funds are spent. This will give them a say within their own political climate.
Bitcoin Has Low Transaction Costs
As Bitcoin is not kept in a brick-and-mortar building no matter the amount, the costs of Bitcoin transaction processing are minimal. For instance, there is no need to pay for rent, employee wages, or utility bills.
Elimination of all these charges accounts for the low Bitcoin transaction fees. This will, in turn, encourage more people to trust Bitcoin and start considering using it for transactions.
This will also allow global economies to become more closely intertwined. With Bitcoin, users may choose to use a broker (Bitcoin Exchange) or not, and depending on the exchange you choose, you can even carry out Bitcoin transactions without any minimum deposit requirements.
In conclusion, Bitcoin has great potentials to solve world economic problems and has shown that by paving ways for easy and more secure financial transactions in terms of international money.
Nevertheless, Bitcoin can’t easily replace the FIAT currency or become the base currency for the whole economy. This is partly because of the volatile nature of Bitcoin, which can’t be ignored.
More so, some impressive progress must be made in some crucial areas before regulators can accept Bitcoin as the base currency. For instance, deflation [as Bitcoin has a specific total number that can be mined] and any other factors will hinder the development of the cryptocurrency economy if Bitcoin becomes the base currency.
However, using alongside the FIAT currency, Bitcoin can help with economic problems.