'The narrative of de-dollarization' and 'Bitcoin replacing US dollar' are the two concepts in modern economics that are gaining momentum in recent times. The former is attributed to countries and people who are hesitant to trade and exchange for dollars and the latter presents a solution for the former. In this article we are going to discuss about the post-dollar efficacy, valuation and implications of Bitcoin on the world economy. Let's dig deeper.
Currently people make tons of arguments in favour of Bitcoin as a better medium of exchange. Rightly so as Bitcoin is cheaper, transparent, decentralized and most importantly a Peer-to-Peer system.
In case of dollar and fiat, most central authorities rely for the value on loans taken out. Banks create money when people borrow loans. While fiat or dollar has value just because a government declares it a legal tender, it does not have any intrisinic value. On the other hand Bitcoin does not rely for its value on loans. Instead Bitcoin has intrisinic value beyond trust as it is based on maths and the trust lies in system of consensus not in a central authority.
In short bitcoin is beyond trust and does not need a legal tender status. Its efficiency lies in it's design. It is a democratic currency that can be used by anyone, anywhere and anytime.
Unfortunately we currently value Bitcoin in terms of dollar. Supposing dollar collapses some day, this valuation of Bitcoin might go irrelevant. Thus calculating the value of Bitcoin against major asset class like gold and real estate seems a better option.
Now let's find out why Bitcoin is poised to replace dollar as a world currency:
- Any fiat currency can't be called a global currency as governments for various reasons like one and dislike the other. There are as many fiat currencies as the number of countries on the globe. Each country has its currency with its own policy. Bitcoin, on the other hand can't be controlled by a single nation, nor does it like regulations. Whenever a country's financial system falls, people will adopt Bitcoin and cryptocurrencies.
- The excessive money printing by central authorities have led to spark the question of debasement of fiat currency. It's so true that US Dollar and other fiat currencies never have a value of their own, even then fiat money if printed too much, is poised to lose value. But Bitcoin is limited and can't be printed or mined more than 21 million. Recent adoption of Bitcoin as store of value by governments and banks make a point for Bitcoin on its way to de-dollarize the world economy.
- Believe it or not, the number of people using US dollar is lesser than those of using Bitcoin or Cryptocurrency. Again theres no system that can supress the voice that is as loud as the entire human race carries. It's just a matter of time when everyone reaches a general consensus that Bitcoin is the new currency of the globe.
- Fiat currencies do not resist inflation. 1 dollar remains 1 dollar even after 100 years of hoarding. But Bitcoin is anti-inflatory. Inflation is another big reason for dethroning Dollar and it's definitely be a coffin stone for dollar.
Overall Bitcoin has all what it takes to become a global currency. It is free from many shortcomings that fiat currencies feature. Unlike fiat currencies 'Bitcoin is no nation's burden and no nation's privilege.' It's just a matter of time when Bitcoin becomes the world currency and de-dollarize the Earth.
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