#Fiat vs. #Bitcoin: the battle for monetary dominance.
Fiat #money is regulated and issued by central banks. Bitcoin, on the other hand, is decentralized money that operates on a peer-to-peer network without a central authority controlling it. Every 10 minutes, new Bitcoin is issued, and its issuance is reduced by half approximately every four years. This event is known as the halving. The issuance is programmatic and objective, unlike Fiat, which has arbitrary issuance. Miners expend energy in the form of electricity and capital to group transactions and post them onto the blockchain, a public ledger that records all Bitcoin transactions since its creation. This exercise is called mining. While the exact supply of Fiat is impossible to determine, Bitcoin is capped at 21 million, which means there will never be more Bitcoin.
Fiat transactions' settlement time varies, and bank transfers, credit and debit card payments typically require a few business days to settle fully. Their settlement time is affected by holidays, weekends, and translation volumes. Bitcoin transactions, on the other hand, are settled every 10 minutes to an hour, which is the time it takes to mine a block and add additional blocks for confirmation (i.e., best practice is six blocks). Bitcoin is a monetary system that is open 24/7, 365 days a year, whereas traditional banking systems are usually open between 9:00 AM to 5:00 PM, 260 days a year.
To transact in our current Fiat monetary system, you typically have to disclose personal information as per government decree in order to comply with KYC and AML rules. This results in the large number of the population being unbanked with limited access to financial services in certain countries, mainly the underdeveloped or developing ones that are ruled by oppressive and corrupt governments. There are approximately 1.4 billion unbanked people in the world. Bitcoin is permissionless, meaning it does not require any identification. All you need to do is set up a wallet, and you can begin to transact. Transactions on the Bitcoin network are pseudonymous, meaning they are not 100% anonymous and can be traced back to you with the proper technology. However, they do not reveal any personal information. Anyone can audit all the transactions recorded on the blockchain given its public nature, but the identities behind the Bitcoin addresses are typically anonymous.
Inflation has become a major talking point these days. Central banks worldwide are at war with inflation. Inflation destroys the purchasing power of a currency over time. Basically, your hard-earned money buys less. Inflation is a result of having more dollars in an economy with the amount of goods remaining stable. As more dollars pursue a relatively stable amount of goods, the price of these goods increases. Inflation is a consequence of the expansion of the money supply by central banks. Bitcoin, on the other hand, has a fixed supply and is designed to be deflationary. Given its absolute scarcity, it is built to preserve value over time, making it an ideal savings tool compared to Fiat, which loses value over time. The dollar, for example, has lost over 90% of its value since 1971, the year the world moved to a Fiat standard and no longer allowed the conversion of dollars to gold.
Regarding accessibility, Fiat money is limited by borders and FX regulations, making cross-border transactions complex and costly. Bitcoin, however, is borderless. It allows you to transfer value across the globe at the speed of light without the need to go through middlemen.
Fiat has served its purpose as an experiment that has gone on for too long. It is time to move towards a commodity-based monetary system. However, this time we should consider using a digitally native asset such as Bitcoin. Bitcoin has similar characteristics to gold, but it also improves upon them, particularly in terms of decentralization and transportability. These are two of the main flaws of gold, which tend to centralize over time, ultimately leading to Fiat money, and its difficulty in moving around for final settlement.
