Bitcoin is claiming that it’s the very first decentralized P2P payment network that’s powered by its own users without the presence of middlemen or central authority. As a matter of fact, it is the same reason why there are so many trading platforms and bots like that have filled the market. In reality, the lack of central authority is the major reason why governments are not confident of cryptocurrency.

As a regular individual, you may not be able to totally understand the fear that this is causing to the government as well as currencies. So let us try to step down another level.

What We Trust?

Fiat is the term that’s used in describing traditional currencies issued by the government. These fiat currencies actually have no value until the government say they do. To the people under its sovereignty, this means nothing. At the end of the day, fiat currencies aren’t supported by tangible assets. You simply cannot return the currency back to the government so you get a bar of silver or gold, pack of cigar or any items that may have value to you.

Fiat currencies are backed by government credit and full faith that’s been issued on them. So, if you want silver, gold or pack of cigar, you have to trade your fiat currency with someone who has that item.

Why having Control Matters?

It is the government that is controlling fiat currencies. They are using central banks in the issuance of money. They do this by what’s referred to as monetary policy in exerting economic influence. They are dictating as well how fiat currencies could be transferred by allowing them to monitor currency movement, direct who will profit from movement, track criminal activity and collect taxes on it.

All these controls will be lost as soon as non-government entities have created their own currencies.

There are drawbacks for having control over policy. And there are a lot of them. Possibly, the one that is affected the most is the nation from its effort in controlling crime, nation’s fiscal policy and business environment. While every topic is deep and broad to fill in the void, let us discuss what’s fundamental in this concept.

  • Fiscal Policy

Due to the reason that the government increases or restricts intentionally the amount of money that’s circulating in the economy to stimulate spending and investment, avoid recession, generate jobs, having control over currency is actually a huge concern.

Categories: Uncategorized