Ways How Bitcoin was Engineered to be an Economic Salvation Route
Many folks see bitcoin as a robust defensive asset akin to gold, which can protect them from the many shortcomings of the legacy financial system. The world’s first cryptocurrency has held up better than most traditional investment instruments during the ongoing Covid-19 induced economic meltdown.
The world is slowly shifting from traditional financing to a P2P payments model and decentralized finance. In this article, we look at how its anonymous creator engineered bitcoin to be a haven from the many perils of the terminally ailing traditional financial system.
Bitcoin Could Have Prevented the 2008 Recession
Bitcoin’s pseudonymous creator, Satoshi Nakamoto, started working on his white paper in 2007, just a year before the infamous 2008 economic crisis hit the global economy.
The meltdown started with the collapse of the mortgage industry but quickly infiltrated the entire financial ecosystem. As a result, central banks were forced to drop interest rates and print astronomical amounts of money, leading to unprecedented bankruptcies and hyperinflation.
Nakamoto’s invention wasn’t a reaction to the recession that gripped the world as bitcoin neared its arrival on the world stage. However, the mining of the genesis block in Jan 2009 appeared to be a timely solution for the fundamental problem of financial sovereignty that ultimately led to the collapse of the financial ecosystem a year before.
Unlike standard currencies, BTC isn’t controlled by any government or central authority. That makes it immune to political interference or inflationary measures by central banks. Governments’ reckless measures, which included unwarranted bailouts for big financial institutions that had misappropriated user funds, were the primary cause of the 2008 financial crisis.
Had the world embraced bitcoin as the standard currency at the time, that it would have averted crippling catastrophe. That is because governments wouldn’t have to circumvent the tight fiscal controls that safeguard against inflation on the BTC network.
Moreover, the Bitcoin ecosystem is engineered to foster trust, transparency, and accountability via its immutable blockchain infrastructure. As a result, everyone in the world would have quickly caught on to the unscrupulous dealings between financial lenders and central banks, as all transactions would be recorded on a tamper-proof public ledger.
Bitcoin and Financial Freedom
Crypto advocates and financial experts often argue that bitcoin’s main appeal is its ability to offer individuals unprecedented financial freedom.
For one, the coin was designed to be decentralized, allowing consenting individuals to exchange value across borders in a fast and affordable way. Moreover, the transactions are done without intermediaries, allowing bitcoin users to circumvent draconian capital controls and other restrictions on financial transactions in their jurisdiction.
Bitcoin is censorship-resistant and anonymous, meaning that governments cannot regulate or monitor a user’s transaction history as they would in the traditional financial world.
In many parts of the world where autocratic governments crackdown on political dissidents by freezing their bank accounts, peer-to-peer bitcoin transactions have emerged as an invaluable escape from financial oppression. The decentralized nature of BTC enables folks to eliminate financial borders and attain true financial freedom.
World governments such as China are clamping down on bitcoin in a desperate attempt to maintain the status quo where they have full control over fiscal policy and the money supply. Nevertheless, the relentless storm created by digital currencies promises to disrupt the conventional model of finance soon.
Fostering Financial Inclusion
The unbanked worldwide who lack access to a bank account can now transfer value globally using decentralized cryptocurrencies like bitcoin and participate in the financial system.
Essentially, anyone with an internet connection can send and receive crypto regardless of their geographical location or financial status. Furthermore, bitcoin fees are meager, enabling users to evade exuberant fees charged by traditional banking institutions for basic financial transactions.
El Salvador recently adopted the king coin as legal tender in a historic endorsement of bitcoin on the world stage. The president of the Latin American nation explained that he had embraced bitcoin as it could solve low banking penetration and reduce the cost of sending payments.
Bitcoin as an Inflation Hedge
Since the Coronavirus struck the world in late 2019, central banks have resorted to issuing the largest economic bailouts in history to mitigate against the worst economic downturn in decades. The result has been rampant hyperinflation, leaving investors desperate for an alternate asset class to safeguard the value of their hard-earned cash.
Along with other traditional investment vehicles such as stocks and gold, BTC took a major hit as the economic situation worsened globally. However, bitcoin quickly recovered and even attained an all-time high during the pandemic period, unlike conventional securities and commodities.
According to a report by coinmarketcap, BTC outperformed gold in 2020, garnering approximately 3x returns to that of the precious metal, traditionally the leading store of value.
The flagship cryptocurrency’s impressive performance against gold, bonds, and even tech stocks cemented bitcoin’s standing as the natural successor to gold. It even prompted some analysts to tip their hat to Satoshi’s genius invention. For example, analysts at Bloomberg recently wrote that bitcoin’s past-year performance has proven to skeptics that bitcoin can rival gold as the main protector against fiat currency debasement.
As the world braces itself for a long and lingering recession, bitcoin is well poised to help counter the effects of the impending economic turmoil. As ‘crypto dad’ Christopher Giancarlo argues, the future of money and things of value is digital.
Creating a viable economic escape route is what the creator of bitcoin had in mind when he came up with his deflationary digital currency. Satoshi wrote in his white paper that his revolutionary form of money would counter the breach of trust from governments, which had a history of debasing the currency.
Besides bitcoin’s growing reputation as an inflation hedge, the coin has gained recognition for its attributes as an exceptional store of value. As a result, many investors have ventured into the BTC market, as it provides a long-term asset storage platform that is resistant to inflation and where governments can’t reach.