Jon Holmquist is a partner at www.coinabul.com, Bitcoin’s only marketplace for gold bullion You can contact Jon at jon [at] coinabul.com with any questions regarding Bitcoin.
Fiat currencies have some inefficiencies. These inefficiencies are costing our nation and her people billions of dollars each year. These inefficiencies are being used by greedy politicians to overtax Americans. These inefficiencies also make the dollar harder to manage and in the long term limit job growth. There is a one word solution to this problem, the next big step in monetary evolution: Bitcoin.
Now, before you get distracted by what you’ve heard about Bitcoin, let me tell you that this article is about what you haven’t heard about. This article will discuss the technological advances Bitcoin has accomplished in easy-to-understand english. So, get a cup of coffee, and let’s start with the basics:
Bitcoin is a new form of online money. Unlike other attempts to create online money, Bitcoin is run by no person or organization. Bitcoin is truly headless, this means it does not act as a middle man and is free to all people to use with minimal fees. This is good for a monetary system because it is totally autonomous. It doesn’t require any effort by any organization to run or maintain. The users of the system, and their computer’s processing power, allow the system to work. This is quite easily the most democratic monetary system that has ever existed.
Now let’s talk economics. One lesson in Econ 101 discusses inflation. Inflation is best shown by looking at everyday consumer goods. These consumer goods are basically anything you can purchase at Walmart. The price of these goods have slowly risen over the years while the value of the dollar has fallen. That means that if you were to hold onto a single dollar, year after year it would lose purchasing power. So if you went to Walmart with $200 twenty years from now, it may only allow you to purchase half of the things you could purchase today.
This affects every American because it allows the government to implement an “Inflation Tax”. The government prints more money and by doing so the money you own becomes less valuable. This silent tax allows politicians to take purchasing power away from the wealthy and the economy as a whole.
In contrast, Bitcoin limits the government’s ability to tax through inflation. Since more bitcoins cannot be created on demand or through legislation this allows for a secure investment safe from depreciating government currency.
Another inefficiency Bitcoin solves is counterfeiting. Fighting counterfeiters is a full time job and even the Secret Service, who investigates counterfeits, can’t catch all the counterfeiters. Nearly 600 billion U.S. dollars are counterfeit. The counterfeiting wars are a constant arms race that costs the U.S. taxpayers more with each passing year.
In contrast, Bitcoins are mathematically impossible to counterfeit. Switching from the dollar, or even simply using Bitcoin as a way to transfer large sums of money, cuts back on fraud, and therefore cuts down on spending. Bitcoin helps reduce government spending and provide more secure transactions. Bitcoin has solved the issue of counterfeiting. No longer can North Korea leech off our economy by counterfeiting U.S. dollars.
Lastly, Bitcoin is already providing hundreds of startups the ability to accept payment online. For example, the company I work with, Coinabul (http://coinabul.com), launched in October of 2011. We allow our customers to securely and privately purchase gold online using Bitcoin. Bitcoin allows us to avoid fraudulent chargebacks that would normally raise prices by up to 10%. We’re able to lower fraud and pass the savings onto our customers. We’re just one company in a sea of startups. The geyser of economic activity blooming from Bitcoin truly shows how useful Bitcoin is for the online economy.
Bitcoin has created an amazing monetary system that can definitely be used as a model for the a redesign of national currency. The benefits that a Bitcoin-esque monetary system provides would save the country a lot of money long-term.