How does a crypto currency differ from a real currency?
The main difference between crypto and real currencies, is that real (tangible) currencies are centralised, i.e fully controlled by Central Banks. Central Banks control the amount of money in circulation, with the objective to achieve balanced economic growth as well as a stable currency and job market. The main tool in executing this monetary policy is through interest rates. Central banks are still the undisputed centre of monetary power (read our article on inflation).
Bitcoin, on the other hand, is intangible. It is a computer file sent from one computer to another, from digital wallet to digital wallet. Bitcoin is a decentralised currency, existing without links to the established order. It is not controlled by any Central Bank and unaffected by interest rates or currency fluctuations. Satoshi, in inventing Bitcoin, aimed to establish a monetary system, where people are in charge of their own destiny away from the existing power structures. Not surprisingly, Central Banks and governments do not like Bitcoin and cryptocurrencies in general. At times, they even depict Bitcoin as ‘dangerous’.
Henry Ford said, decades ago, that, “it is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe, there would be a revolution before tomorrow morning.”
It has taken Bitcoin a bit longer to create a monetary ‘revolution’, but over time it has created a paradigm shift in the perception of what currencies or monetary value mean. Central Banks these days are scrambling to counter this revolution and maintain power. The Bank of England recently even proposed to issue its ‘own’ digital currency (which of course totally defies the purpose). But the crypto cat is most definitely out of the bag.
Another nice ‘Satoshi touch’ with regards to Bitcoin is, and the reason why its price keeps going up, that the amount of ‘coins’ that can be mined is finite. Satoshi made sure, from the start, that only a total of 21 million Bitcoins could be mined. Once this number is reached, supply will be tapped out. There are currently already 18.7 million Bitcoins in circulation. It seems that the price for Bitcoin therefore is infinite. Just a quick look at the latest prices supports that statement. Bitcoin has come a long way from its original $0.08 value per coin to a value of around $55,000 today (and rising). Maybe it is time to own a bit, of a bit, of Bitcoin. Just in case….