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Discussion on the potential for Bitcoin to become a new world reserve asset during a Rootstock ambassador meeting.
They compared Bitcoin to gold as a store of value and discussed Bitcoin's advantages over gold, such as its fixed supply, decentralization, and ease of storage.
While Bitcoin is not currently a good unit of account, it has the potential to become a great store of value over time.
Backing stablecoins with Bitcoin through the Rootstock blockchain could help promote mass adoption.
The choice we face between CBDC’s and decentralized currencies backed by Bitcoin will shape the future we will inhabit.
Introduction
During a weekly Rootstock ambassador meeting, Victor Lazarte, Legosi and Axel Becker discussed the potential for Bitcoin to become a new world reserve asset. They compared Bitcoin to gold as a store of value and discussed the advantages of Bitcoin over gold.
The Evolution of Money
To understand Bitcoin, one must first understand money. The evolution of money started with bartering and progressed through different mediums of exchange until the world adopted gold as a standardized exchange. The US dollar became the new reserve asset of the world after Nixon broke the gold standard in 1971. Currently, there is nothing backing the financial system except for the US military and confidence in the government. As a result, some countries like China and Russia are seeking alternatives to the US standard, leading to a shift in the balance of power in the world.
The Characteristics of Money and Bitcoin
Money has three characteristics:
1- A store of value
2- A unit of account
2- A medium of exchange.
While Bitcoin is not currently a good unit of account, it has the potential to become a great store of value over time. Fiat money was created to solve gold's issue of divisibility and portability, causing gold to be centralized in financial institutions and banks. On the other hand, Bitcoin is decentralized, making it much more secure than anything else on the planet. Bitcoin is also immutable, pseudonymous, and its price is subject to the free market.
Bitcoin as Digital Gold
Bitcoin is a great store of value on long-time preferences, and as the network grows, it should become more stable. The comparison of Bitcoin to gold as a store of value is becoming more prominent since gold has always been regarded as the best store of value. Bitcoin beats gold in counterparty risk, scarcity, longevity, and storage.
Backing Stablecoins with Bitcoin through Rootstock
The idea of backing stablecoins with Bitcoin through the Rootstock blockchain can take a massive step towards mass adoption. Currently, there are DOC and DLLR from Money on Chain and Sovryn, respectively, creating these new tools. Bitcoin needs the Lindy effect, which means that as more time passes on an asset, there is more security and stability in the eyes of the people and it is more likely to be adopted.
The Bitcoin Trilemma and Rootstock's Solutions
The Bitcoin trilemma states that a blockchain can only optimize for two out of three from decentralization, security, and scalability. Bitcoin is optimized to be both secure and decentralized, so it cannot be scalable on its base layer. This is why there is a need for layer 2 solutions like Rootstock and Lightning Network. Rootstock brings more scalability with faster transactions and smart contracts on top of Bitcoin, taking advantage of its security and decentralization. It uses the same programing language as Ethereum effectively creating the best out of both worlds. This enables a fully robust and complete financial system to be built on top of the greatest and most secure asset we know.
Why Bitcoin-backed stablecoins are better than CBDCs
CBDCs are stablecoins issued by central banks, marketed as legal stablecoins that bring you all the benefits from cryptocurrencies. However, they can be used as tools of surveillance and control, with access to all transaction data and the ability to freeze accounts.
Bitcoin-backed stablecoins, on the other hand, are decentralized and censorship-resistant. Users, we can always check and verify in real time the Bitcoin reserves, something that is impossible in the traditional systems.
Bitcoin is already acting as a digital gold, with the potential to become a global reserve asset. While it may not be a good unit of account at the moment, it is a great store of value and has many advantages over gold and fiat currencies. With the emergence of Bitcoin-backed stablecoins on Rootstock, we can take a massive step towards mass adoption and create financial instruments backed by BTC.
Rootstock, with its faster transactions and smart contracts on top of Bitcoin, takes advantage of the security and decentralization of the Bitcoin network. With Bitcoin and Rootstock, we can create truly decentralized and censorship-resistant financial systems that empower individuals and communities.
Community Call
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