Legal tender, gold and bitcoin: Three PKs in the form of three currencies, which is the most ideal?

Source: Medium

Compile: First Class (First.VIP)_Jill

Editor's Note: The original title is "LK in three currency forms. Which one is the best?" 》

The current problem with all our currencies is that their value depends on trust in third parties. History shows that this trust is not ideal.

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Problems with current currency operations

The current problem with all our currencies is that their value depends on trust in third parties. History shows that this trust is not ideal.

Third-party control is obviously not ideal

The discussion on how to form a better and more stable currency is not new. Before the publication of Nakamoto's white paper, people have been discussing the creation of a new form of currency.

This paper attempts to distinguish between the three forms of currency in the current society and emphasizes which one is the most ideal.

Legal (government) currency

Legal or legal currency is a currency issued by the government and regulated by a central agency (usually a central bank). It is called "legal" because the government has issued a decree/regulation to declare its legal currency status.

The law is not linked to anything. All the currencies of the world were once linked to gold, but in 1971 President Nixon took the world out of the "gold standard."

Although there are many advantages to the legal currency for regulators and governments, there are also many disadvantages. All the laws in the world suffer from inflation to a certain extent. The government can print banknotes as needed, which results in a lower value/purchasing power of the currency over time.

Value is broken over time

It should also be noted that the average life of legal tender is only 27 years. Although legal tender is the easiest to trade and hold, it is not an ideal form of currency.

gold

Since the advent of human civilization, gold has received attention. No currency commodity has a long history like gold, which is also a unique feature of gold value.

The durability of gold is also a feature of one hand. Most of the gold that was discovered still exists and may exist forever.

Gold has many positive features, but it also has some negative features. As shown in the above figure, transporting large amounts of gold can be difficult and unsafe, and it is difficult to divide gold into smaller quantities for lower value or daily use. Most importantly, because the government can regulate gold (such as India's "Golden Control Act"), it is unrealistic to transport gold over long distances.

Even with these restrictions, gold is still a better form of currency than legal tender. Its purchasing power has been maintained very well for a long time, and we have no reason to believe that it will not last in the future.

Bitcoin (cryptocurrency)

Bitcoin is a new form of currency known as cryptocurrency. More importantly, it is a solid currency, defined as “a currency that is not influenced by the government and political parties, and that is determined by the market to purchase power.”

Although people who don't know much about Bitcoin may despise it, Bitcoin is already one of the top 30 currencies in market capitalization when they don't realize it. In addition, Bitcoin currently has a lifetime of 11 years, almost half of the traditional currency.

Bitcoin is a better form of currency than legal tender and gold. Bitcoin has a total supply cap of 21 million and its inflation rate is fixed. Bitcoin supply is reduced every four years, knowing that its 21 million supply to the whole society. This feature is brand new and unique to Bitcoin alone, and gold and statutory do not have this innate scarcity. Although gold is scarce, its supply will inevitably increase due to possible other methods of mining gold (eg deep mining).

Almost all features of Bitcoin are also better than the first two (see above). Vijay Boyapati's article gives a deeper overview of Bitcoin's characteristics as a currency

The only shortcoming of Bitcoin is its short history. Although Bitcoin only existed for 11 years, it is worth noting that it was born in the 2008 financial crisis. The crisis shows that society cannot trust fiat money for a long time (it has been proven several times that this view is correct).

We also have no reason to believe that Bitcoin can't survive for a long time, because no entity can shut it down (even if it's a government agency), and there is no incentive to shut it down.

Why is it important to seek other forms of currency?

All of this can be attributed to the shortcomings of legal tender. History shows that we cannot trust that the government can fully control the money supply of its country. Even some governments have no complete trust in their currencies. Many countries in the world are stocking gold.

Nick Saab said:

"All the money that humans have used is insecure to some extent. From forgery to theft, this insecurity has been manifested in many ways, but the most terrible thing may be inflation."

Inflation has had disastrous consequences for citizens.

Although Bitcoin is still in its early life and is quite complicated to understand, it is the first form of currency that is resistant to inflation and is not controlled by any single entity. It also makes up for the lack of gold because it is highly severable and can be transferred almost anywhere in the world without the need for a trusted intermediary.

Most fiat currencies will fail, and everyone should consider and protect themselves from potential economic meltdowns or high inflation rates. Gold and Bitcoin are two excellent ways to circumvent.

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