It is no secret that most everyday consumers are getting fed up with the financial ecosystem as we know it. Banks have lost any shred of trust in the eye of the public and are doing nothing to improve their image. But at the same time, these same consumers are unwilling to take matters into their own hands, and keep fueling the failing ecosystem for the time being.
Also read: Why Europe is not the Future of Bitcoin yet
The Everyday Consumer: Complaints but no Action
Being fed up with the traditional financial ecosystem we all know and hate is one thing, and voicing complaints on social media is a small step in the right direction. If enough people share the same thought, Facebook groups and Twitter hashtags condemning financial institutions will become popular for a time. But these efforts are not enough, as simply making your voice be heard will not solve anything.
Contrary to what some might want to believe, we cannot survive without a financial ecosystem right now. Going back to the days of barter sounds fine on paper, but it’s not a viable option for humanity anymore. We have all grown accustomed to paying for goods and services through something that holds [the illusion of] monetary value.
This brings us to a first topic of conversation, as fiat currency has no inherent value whatsoever. A fiat currency bill — let’s say $20 USD for example — is just a piece of paper with a neat printing job. The bill itself has no value, other than a promise by financial institutions that it represents the value of 20 American Dollars. But what is this American Dollar, and can you hold it in a physical form?
The answer to that question brings us to topic number two: is fiat currency more “real” than virtual currencies? On paper, the answer to this question would be “yes,” but in reality, the answer is “no.” Granted, fiat currency is physical, as it comes in the forms of notes and coins we can all touch and hold.
But that is far as the differences go, as that bill or coin in your wallet represents nothing tangible. Whereas most people believe fiat currency is backed by precious metal reserves, they couldn’t be more misled. There is not enough precious metal in the world to back all fiat currency in circulation.
Taking into account how central banks can print more money on demand, the real problem comes to the surface. If money is backed by anything tangible, and more money is printed to increase the “value” of the total supply, shouldn’t there be more tangible assets to back this “extra” money? Well, yes, there should be, but they don’t exist.
What it comes down to, is this: fiat currency’s value is the illusion created by financial institutions to give the note or coin value to customers whenever they deposit funds. Outside of the financial institutions themselves, the notes and coins have no inherent value. Yet they are being used as a commodity that has value, simply because everyone has grown accustomed to the idea of there being a value tied to this form of payment.
But Bitcoin has no Value Either!
Yes, and no. Bitcoin isn’t backed by any tangible assets, and the price is determined by the people looking to buy and sell virtual currency. That price can fluctuate heavily on a day-by-day basis, but so does fiat currency. So what makes Bitcoin different from the fiat currency we use today? The aspect of financial freedom.
This is where the “no” part of the statement comes into play, as Bitcoin offers the same tangible value as fiat currency these days. But the major difference is that fiat currency is controlled by financial institutions, who can create more “money” at any given time. Doing so hurts the existing monetary supply, though, as the previous supply loses value.
Bitcoin, on the other hand, has a fixed monetary supply of 21 million coins that can ever be created. It will take until the year 2140 for all 21 million bitcoins to be mined, giving the virtual currency time to settle in and show its technological prowess. There is no central authority to “issue” more Bitcoins past the 21 million cap, giving the scarce supply of coins a potentially high value in the future.
At this time, there are about 14.5 million bitcoins in circulation, and new coins are not diminishing the value of the previous supply. Because Bitcoin has always been transparent regarding coin supply, as well as keeping a public ledger of all transactions since day one, virtual currency is a far superior solution to fiat currency.
It will take time until everyday consumers start flocking to Bitcoin. Most of them are content to complain about the current ecosystem, yet do nothing to change their own financial future. Bitcoin enthusiasts, on the other hand, have started moving away from the financial infrastructure, and cut ties with the banking industry wherever possible. Click here to buy some bitcoins.
How do you see the future of Bitcoin for everyday consumers? Do you feel that fiat currency has an inherent value, and if so, how did that value come to be? Let us know in the comments below!
Images courtesy of Shutterstock, Adam Smith
The opinions expressed in this article are not necessarily those of Bitcoin.com.