The Brexit debacle had caused quite a stir for Britain but has also leaked into the minds of people in other countries in the UK as well. Scotland is one of these regions that has people talking about leaving the EU’s monetary system. A recent paper written by Dr. Craig Dalzell discusses the possibility of Scottish independence, and the country’s possible economic strategies should its citizens decide to leave the EU.
Scottish Paper Details Bitcoin’s Pros & Cons
Dr. Craig Dalzell’s paper, “Scottish currency options post-Brexit,” describes some monetary choices for the country if it chooses to be independent from the EU. Some of them being the £Scot pegged to various other currencies, such as the sterling pound or the gold standard.
Dalzell then discusses what he calls a “new entry into the financial field and one which has yet to be fully tested at a national scale, cryptocurrencies like Bitcoin.”
The paper explains that cryptocurrency could represent the concept of money in a new digital age. He says the method of creating a digital currency like Bitcoin removes third-party intervention, and may have the power to remove “unaccountable corporations.”
However, Dalzell says the unknown verification system of cryptocurrency — unlike legacy financial institutions — may undermine the value of money if used in Scotland.
The paper also takes issue with Bitcoin’s finite supply, stating:
But if, as is the case in the original Bitcoin protocol, the total number of coins is finite then at some point (estimated to be 2140 for Bitcoin) no more coins will be produced. If no more coins are available to miners, then some other form of compensation would have to be provided to induce them to process transactions possibly some sort of transaction fee from which Bitcoin is currently free. This in itself could disincentive use.
One thing to note is that this specific understanding of fees within the Bitcoin network is incorrect, as the cryptocurrency is not free to use. Bitcoin does have fees, and when the estimated 2140 date comes — marking the creation of the final, 21-millionth bitcoin — fees will be the only reward left for miners processing transactions. Unfortunately, Dalzell’s paper is riddled with many inconsistencies such as this.
Next, Dalzell explains how there could be quite a bit of technical difficulty considering cryptocurrencies as a medium of exchange. Virtual currencies should be viewed as having potential but shouldn’t be “over-idolised as a total solution, which is infinitely superior to existing forms of money,” he says. Dalzell continues, writing that even if technical solutions are all addressed, many economic implications such as currency interaction and interest rates would remain.
This isn’t the first time cryptocurrency has been brought up in Scotland. The country’s government has discussed creating its own digital currency in the past. Officials argued that a separate alternative would allow more prosperity for small businesses and the economic well-being of the citizens in general. Dalzell’s report describes similar attributes with cryptocurrency adoption and the pegging of the £Scot.
However, Dalzell’s deliberation of cryptocurrency shows that he may not fully understand the technology, with his inaccurate explanations and his designation of cryptocurrency as a form of fiat.
“In very simple terms,” Dalzell inaccurately comments, “a cryptocurrency is a decentralized digital fiat currency whose units or coins are denoted by a complex identifying code.”
Meanwhile, the Scottish independence movement appears to have tapered off, at least for now, leaving Dalzell’s paper — and its misconceptions about cyrptocurrency — with little significance for Scotland’s political realm.
What do you think about Scotland adopting cryptocurrency like Bitcoin if they left the EU monetary system? Let us know in the comments below.
Images courtesy of Pixabay, Wikimedia Commons.
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