The Financial Clash Of Titans: Crypto vs. Banks and Fiat!
Read about the Eternal Dilemma Tempting Your Wallet. Who Wins in the Battle for Your Money? Dive into the Debate!
Deciding where to entrust your hard-earned money today is a significant question and a tough dilemma facing the average person who just wants prosperity for themselves and their family.
Some say invest in stocks; others say gold is the best option. However, the biggest debate lately revolves around banks and cryptocurrencies. In this age of digitization, it seems time to digitize money, and this has been achieved through the discovery of blockchain and cryptocurrencies, especially Bitcoin, often referred to as digital gold.
History and Evolution of Money: From Animal Skins to Paper!
Throughout history, there have been several transformations in the means of payment and the transformation of money. The first was the transition from barter to coined money. Let me explain what happened in a few short sentences.
In the dawn of our civilization, people had the need to exchange surpluses of their goods, leading to barter, where people exchanged excess produced goods, such as corn for milk or animal skins for a metal spear or axe. It was a simple era of beginnings, and since they didn’t know better, this system was the pinnacle of the finances of human civilization.
When our ancestors realized that this system was flawed and deficient, they began to exchange goods for new means of payment, such as beads, rare seeds, or colored stones that served as currency with a known value. As this system was flawed due to the lack of a common means of payment and the beads, stones, or seeds being different and quickly worn out by use, money evolved again, this time into metal pieces, and metal plates.
The dawn of fiat money
Seeing that this system was much better because the value of the currency could be tied to the value of the metal, people slowly began to mint coins. Thus, money evolved again, this time into real coined money. Coined money, in one form or another, was minted for years, centuries, and even millennia, and it has persisted to this day in the form of coins that we use every day.
The last evolution of money that occurred recently was the evolution of coined money into paper money in the form we know today and use in everyday life.
Now that we have briefly presented the history of fiat money, let’s also discuss the brief history of digital money, which, compared to fiat, is just a newborn that requires a lot of attention and care to develop into real money.
Digital Money or Cryptocurrencies: The Next Step in the Evolution of Money!
Digital money or cryptocurrencies are the logical next step in the evolution of money that needed to happen, and it happened with the creation of the blockchain and the launch of the Bitcoin revolution.
Brief Definitions of Blockchain and Bitcoin:
Blockchain:
Blockchain is like a digital journal that records all transactions. Imagine it as blocks of information, each connected to the previous one. When something changes in one block, it automatically changes in all, making it super secure!
Bitcoin:
Bitcoin is the king of cryptocurrencies! It’s virtual money that operates on the blockchain. Without banks or governments controlling it, Bitcoin is like the mysterious superhero of currency, ready to conquer the world of digital financial adventurism!
The Story of Satoshi
How and who discovered Bitcoin, the first digital currency, is the question of all questions, and to this day, no one has given an exact answer to it. The official version is that it was programmed and the first block was mined by Satoshi Nakamoto, a mysterious programmer whose identity is still unknown to this day. Some claim that he is an individual, while others say it is a group of mysterious hackers, but no one can confirm it with certainty.
Why and with what goal did Satoshi Nakamoto create Bitcoin?
Bitcoin was primarily created as a counterweight to fiat money and with the aim of starting a financial revolution where every Bitcoin holder, i.e., digital money or cryptocurrency holder, would be its real owner.
What should that mean, and how should I be the owner of my money, surely you are wondering! Isn’t every person the owner of their money, you must have thought! Who can take my money, and why wouldn’t I be its owner?
Money is money, whether it’s digital or fiat money, you might say, but that’s not even close, let alone the same. So, what’s the difference, and how do I explain it?
Well, that’s exactly where the rabbit is hidden, and here we come to that basic question posed in the title: Banks or Crypto, Fiat or Cryptocurrencies.
Bitcoin or Fiat: That Is The Question?
If you have a lot of fiat money and are very wealthy, what do people usually do with it? They put it in the bank, of course, and entrust it to the bankers for safekeeping, usually earning a small percentage of interest and multiplying their capital. But is it all so clear and straightforward, and are banks such excellent institutions that just want to help you multiply and secure your money in the bank?
Certainly not! Has anyone in history ever coined the phrase “Good as a banker” or “Generous as a banker”?
No, of course not; bankers are always compared to sharks or some other bloodthirsty beasts and are considered greedy creatures who plunder the people.
So why do most people keep money in the bank? Because they have no choice, and because the financial system is built to favor the rich, banks, and other powerful entities, and the little man always pays the price.
You must keep money in the bank because otherwise, you have nowhere to put it, and nowhere you leave it is safe, and then the banks use it very well for themselves, trading with “YOUR” money and investing it wherever they please, reaping enormous profits, and giving you the crumbs that fall from the table to be satisfied with!
Moreover, governments and states print that money and arbitrarily give it or devalue it, and fiat money is not tied to anything that would give it some guarantee of value. In the past, fiat was tied to gold, and each country had to guarantee a certain amount of gold for each banknote, they couldn’t print money arbitrarily because if they printed money without coverage, i.e., a counterpart in gold, they would cause inflation of money, and it would rapidly start losing its value.
That so-called “Gold Standard” was abandoned, and now money has no guarantee in anything and is not tied to the value of anything, so states and politicians have the freedom to print money arbitrarily, and with that, paper money rapidly loses value, and inflation and crisis occur, and the poor ordinary man eventually suffers because his work is worth less and less, and the prices of goods skyrocket.
When we have clarified and studied all this, do you still think you are the complete owner of your money? Well, of course, you are not, because states determine its value as they wish, and banks with that “your money” do what they want and invest it wherever they want with enormous profits, completely legally, and you can do nothing about it. And there is one more thing to worry about and that is the state can take away that hard-earned money from you in a second with one regulation or law!
You, in fact, only possess that money, and only at the moment when the paper, i.e., money, is in your hand because when it is in the bank account or on your credit card, they are just numbers that the bank handles, and you, in fact, hold only a piece of plastic that guarantees that your money is safe.
Because of this situation in which people find themselves today, many have turned to the Bitcoin revolution and adopted the principles of Satoshi Nakamoto, investing their fiat money in cryptocurrencies like Bitcoin, Ethereum, and others.
So, how does this digital money differ from fiat, and what are its advantages and disadvantages?
Digital money does not need to be printed and is not subject to inflation; it is deflationary because it exists in limited quantities, causing its demand to increase, and so does its price. For example, there will only ever be 21 million Bitcoins, creating FOMO due to its limited quantity.
The three pillars of Blockchain
Primarily, Blockchain, and thus cryptocurrencies like Bitcoin, rely on three basic pillars of the Blockchain: decentralization, scalability, and immutability, through which power returns to the hands of the common man.
⦁ Decentralization means that there is no central authority like a state or a bank that would control the Blockchain and thus the cryptocurrency, and the power is in the hands of the one who owns it, and he is its only owner.
⦁ Scalability in terms of the blockchain refers to the network’s ability to quickly and efficiently process an increasing number of transactions and is crucial because, in the crypto world, everyone wants a piece of the action, giving the individual the opportunity to participate.
⦁ Immutability in the blockchain means that data is permanent and cannot be changed after recording, contributing to security. Each block in the chain contains a reference to the previous block, creating an uninterrupted chain of information. Immutability is a double-edged sword. On the one hand, it ensures that transactions and records are protected from unauthorized changes, fantastic for security and trust. On the other hand, if you make a mistake in a transaction, it is there forever.
Not all cryptocurrencies fulfill all three of these conditions, and not all are perfect, but unlike fiat money, they try to give back at least some power to the common man.
So, for many people, they are an exit in an impossible situation and the future of money and finance. I think cryptocurrencies are a very good thing and can contribute a lot to the financial sector if they are in the right hands. If they fall into the wrong hands and if their three basic pillars are changed in favor of someone like a bank or a state, then we are back to the beginning and have not evolved an inch.
Conclusion
Cryptocurrencies have many advantages over fiat money but don’t forget they also have their drawbacks and disadvantages, such as significant volatility and market insecurity that easily succumbs to various trends. In the crypto world, there are many fraudsters and false prophets lurking for your money, but again, the immense value of DYOR (Do Your Own Research) and common sense is evident, protecting you from them.
But still, when we consider all the flaws and advantages of cryptocurrencies, I still come to the conclusion that they are slowly but surely coming to victory over fiat and that, in the future, all money will be in digital form. We must consider that digital money is very young and is still in the early stages of its era, full of flaws and shortcomings. However, when it develops to its full potential, then we will truly see all its possibilities in full glory.
I hope you enjoyed my article and my thoughts, so if you agree with them, throw in a few likes or claps and follow my blog, if you have a different opinion than mine, feel free to write it in the comments, and we’ll discuss it together.
You can read this article and much more about crypto on the Medium or on Substack:
Greetings and until my next article!
Neo77
