The original idea and concept of Bitcoin was to create a de-centralized form of currency that could not be manipulated, devalued, or financialized by governments or central banks who throughout history have used the power to print money as the means to accumulate wealth and power at the highest levels. And indeed, the very nature of the world’s most current fiat monetary construct has done just that as less than 20 individuals hold more wealth than half the world’s population.
This is why gold and silver are and were so important in the past because left to their own devices, they provided individuals, communities, and even nations a stable and often un-inflationary form of money that not only grew productivity, but kept a check on corrupt governments until they seized the power to either ‘clip’, or replace gold and silver outright.
But in the 21st century the world is rushing headlong into a new paradigm of digital money, and at stake is the age old battle over who controls the ability to ‘print’ that money. And according to a Professor at MIT, the advent of Bitcoin or some other decentralized crypto-currency could be the answer to both improving and perhaps even saving the financial system.
Simon Johnson, a professor at MIT’s Sloan School of Management, says some form of digital currency could fundamentally improve the financial system.
“How do you feel about the way that our existing financial system operates?” Johnson asked the audience at the Business of Blockchain conference, an event organized by MIT Technology Review. “I myself have a lot of concerns. The system we have is not robust—it almost collapsed in the fall of 2008 in the United States, the most sophisticated financial market in the world.”
In theory, a cryptocurrency such as Bitcoin might make the financial system more stable by providing a way to monitor and trace transactions. Indeed, it may be no coincidence that the paper outlining the concept for Bitcoin was released in 2008, during the financial meltdown. The open-source code for the currency was released several months later, in 2009. Bitcoin was invented by the pseudonymous Satoshi Nakamoto, whose identity remains a subject of great speculation.
Cryptocurrencies might also remove many of the hurdles that make it harder for poorer people to use the financial system, even in advanced countries, Johnson said: “It is absolutely shameful and really embarrassing that so many people in the United States—one of the richest counties in the history of the world—do not participate in the formal financial system.” – Technology Review
In reality a completely Bitcoin based financial system would not be feasible as the 21 million total bitcoins ever to be mined would not fully support both a government and consumer’s needs for over 200 countries. However, a combination of an international trade currency, which would be designated for use by banks and governments only, coupled with a crypto-currency like Bitcoin for use by consumers and businesses that would not be allowed to be traded in financial markets, could solve many of the inefficiencies and corruptions that inevitably spawn over time from the use of a singular form of money.
As former President Calvin Coolidge once said, “The business of America is business”, but what he really should have meant was that the government has no place in interfering with business and free markets. And in a free market, money is determined to be what consumers and producers agree for it to be, and without interference from corrupt men and women who control the means of its production.
Source: The Daily Economist